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Weight of US aid relative to Egyptian GDP has deteriorated: Dcode - Daily News Egypt

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Weight of US aid relative to Egyptian GDP has deteriorated: Dcode

Consulting firm says cutting US aid does not pose economic threat, but may jeopardise Egyptian-American political alliance

Graph Courtesy of Congressional Research service 2013
Graph Courtesy of Congressional Research service 2013



Economic and Financial Consulting firm Dcode noted in its analytical research, titled “US Military aid to Egypt”, that the weight of US aid against Egypt’s Gross Domestic Production (GDP) has noticeably deteriorated, registering 0.6% of GDP in 2013, compared to 5% of GDP in 1991.

Over that period, the value of aid has decreased from $2.3bn to $1.55bn. The main drop in US aid was due to the decision to cut economic assistance, from $1bn in 1991 to $258m in 2013, rather than in military aid.

The research pointed out that Egypt ranked fifth among the top 10 recipients of US foreign assistance in 2012, preceded by Israel and followed by Afghanistan, Pakistan and Iraq.

“On a per capita basis, total US aid to Egypt decreased from $44 in 1991 to $18.5 in 2013, the lowest compared to Jordon and Israel,” according to Dcode.

On the economic implications of cutting US aid, the consulting firm said that “cutting or cancelling aid will necessitate that more financial resources be channeled to the Ministry of Defence to make up for the decrease.”

The firm stated, however, that the cut in aid is not expected to pose serious fiscal pressures in the short term, as Egypt continues to rely on “bilateral aid from Arab Gulf countries, which amount to almost $14bn.”

When compared to other key foreign currency inflows, US aid ranked sixth between 2012 and 2013.

Exports marked the main source for foreign currency inflows, totalling $25.9bn. Remittances ranked second, bringing in around $18.4bn, while tourism ranked third with overall revenue of $9.7bn, and the Suez Canal and Foreign Direct Investments (FDI) ranked fourth and fifth, bringing in $5bn and $3bn, respectively.

Providing further studies on the economic consequences of cutting aid, Dcode mentioned that increased imports of military equipment would exert pressure on foreign currency resources in short-term.

“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,” the report said.

The decision to cut aid would also have political implications.

According to the research, “The decision to cut [US aid] might jeopardise a strong historical alliance and coordination between the two countries, particularly with regards to the Arab-Israeli peace talks and key regional political issues like Iran’s nuclear programme.”

The report mentioned that between 2001 and 2005, more than 35,000 flights were made by American military aircraft, while some 900 military vessels passed through the Suez Canal.

This reflects Egypt’s importance to the White House, the report said, stressing that the relationship between the two countries would affect the dynamic of Middle East politics.

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