November 12, 2013
Lately, the U.S. aid to Egypt had been a hot topic. On October 8, 2013, the United States government announced it will put on hold “the delivery of certain large-scale military systems and cash assistance to the government pending credible progress toward an inclusive, democratically elected civilian government through free and fair elections”. This incited speculations about the partial or total cancellation of U.S. foreign assistance to Egypt and the potential ramifications to the Egyptian economy.
Dcode EFC is presenting all facts relating to military aid in 4 infographs, and 1 “chart of the month”. Through all available public sources, the information are gathered in the infographs and chart, to give insights and answer questions in the simplest formats. Issues regarding the history of assistance, timeline of key statements from officials of both sides, who is profiting most from aid, how the cut will affect the Egyptian economy, in addition to more, are all answered through the infographs, charts, and analysis below.
For the full view please click on the picture.
US Military Aid to Egypt: Behind the Scenes (1 of 4)
US Military Aid to Egypt: History (2 of 4)
US Military Aid to Egypt: Timeline (3 of 4)
US Military Aid to Egypt: In Context (4 of 4)
US Military Aid to Egypt: All What You Need to Know in One Infograph
U.S. Aid to Egypt: A Story of Declining Significance and Retreating Leverage
As exhibited in Figure 1, while the value of the aid had generally been either steady or declining, its weight relative to the GDP decreased significantly from 5% in 1991 to almost 0.6% in 2013. Total aid decreased over that period from USD 2.3 billion to USD 1.55 billion, primarily due a cut in economic assistance from USD 1 billion in 1991 to USD 258 million in 2013., with Military aid staying more or less constant. Egypt is the fifth largest recipient of U.S. foreign assistance after Israel, Afghanistan, Pakistan and Iraq. On per capita basis , total U.S. aid to Egypt deceased from USD 44 in 1991 to USD 18.5 in 2013, the lowest compared to Jordan and Israel.
Dcode EFC’s Assessment:
(1) Political Implications
While the value of the U.S. aid to Egypt is not too significant, the decision to cut it might jeopardize a strong historical alliance and coordination between the two countries particularly with regards to Arab-Israeli peace talks and regional political key issues like Iran’s nuclear program. Between 2001 and 2005, American military aircraft made more than 35,000 flights through Egyptian airspace, often on short notice, while U.S. military vessels made nearly 900 expedited Suez-canal passages. This reflects the importance of Egypt to the White House and how turbulent or deteriorating relation between the two countries might bring new dynamics to the Middle East politics (recently there were talks with Russia over multibillion weapons supply deals with Egypt).
(2) Economic Implications
For Egypt, cutting or cancelling the aid will necessitate that more financial resources be channeled to the ministry of defense to make up for the cut aid. This, however, is not expected to pose serious fiscal pressures in the short-term thanks to the bi-lateral aid for Arab Gulf countries, which amount for almost USD 14 billion. Having said that, the increased imports of military equipment will put some pressure on the foreign currency resources in short-term, but would be rendered insignificant over the medium term as foreign currency generating activities pick up.
Sources: USAID, U.S. Department of State, Congressional Research Service, IMF and Dcode EFC calculations