The U.S. gives Egypt $1.5 billion a year in aid. Here’s what it does.

July 9, 2013

The biggest policy debate roiling Washington right now is whether to continue America's annual $1.5 billion aid package to Egypt. After all, Egypt just had a coup in which the military ousted the country's elected president, Mohammed Morsi. Doesn't that warrant a response?


Mohamed Abd El Ghany / Reuters

The Obama administration says it prefers to keep aid flowing to Egypt for now — for stability's sake. “It would not be in the best interests of the United States to immediately change our assistance program to Egypt,” said White House spokesman Jay Carney.

Yet some key members of Congress are calling for a cutoff. “We need to suspend aid to the new government until it does in fact schedule elections and put in place a process that comes up with a new constitution,” said Sen. Carl Levin (D-Mich.).

So here's a quick primer on the situation — what we actually give Egypt, why we send so much aid, and under what circumstances we might cut it off.

What do we actually give to Egypt? Between 1948 and 2011, the United States has given Egypt about $71.6 billion in bilateral military and economic aid. That's more than we've given to any other country over that time frame save for Israel.

A recent report (pdf) from the Congressional Research Service lays out the details. The biggest chunk is military aid, averaging about $1.3 billion per year since 1987, with much of that military equipment. For instance, Egypt plans to acquire 1,200 M1A1 Abrams Battle tanks from the United States. The components are jointly manufactured in both countries and shipped to Egypt for final assembly. This year, the United States is also shipping 20 F-16 fighter jets overseas. Plus there's money for border security along the Sinai Peninsula.

Egypt also gets a few special financing provisions, says CRS, including the ability to deposit its funds at an interest-bearing account at the Federal Reserve Bank of New York. The nation also gets to engage in cash-flow financing to pay for military equipment, a special provision not available to most recipients, and one that allows Egypt to negotiate bigger arms purchases.

On top of that, Egypt received about $250 million last year in economic aid, money that goes toward health, education, as well as democracy programs. (In past years, the United States also funded big USAID infrastructure projects in sanitation, communications, and so forth. But that was scaled back in the 1990s.)


Obligatory pyramids shot. (Simon Denyer/The Washington Post)

Can you put those numbers in context? In fiscal year 2011, the United States handed out about $49 billion in military and economic aid all told. Egypt got about $1.5 billion — the fourth-largest recipient after Israel ($3 billion), Iraq ($2.1 billion), and Pakistan ($1.7 billion).

On Egypt's end, the assistance plays an out-sized role in the budget. No one knows the exact numbers, but by one one count, "U.S. military aid covers as much as 80% of the Defense Ministry's weapons procurement costs." (In 2011, a Cornell economist estimated that U.S. aid made up one-third of Egypt's broader military budget.)

Why do we give Egypt so much aid? Since the late 1970s, U.S. policymakers have justified the aid as a way to stabilize the region and promote its interests. Here's CRS laying out the official line: "Interests include maintaining U.S. naval access to the Suez Canal, maintaining the 1979 Israel-Egypt peace treaty, and promoting democracy and economic growth within Egypt, the region's largest Arab country."

More recently, the Obama administration has insisted that aid to Egypt is crucial to avoiding broader problems. “A hold up of aid might contribute to the chaos that may ensue because of their collapsing economy, said Secretary of State John Kerry in January. "Their biggest problem is a collapsing economy.”

(If it seems odd that military aid would be so crucial to Egypt's economy, consider this: The Egyptian military is utterly gigantic, one of the largest in the world, "controlling between 10 and 30 percent of the economy and employing hundreds of thousands of Egyptians.")


Egyptian Army soldiers in Cairo. (Hassan Ammar/AP)

Is Egypt's economy really in such bad shape? Yes. For more on that, read this interview with Caroline Freund, who notes that Egypt's economy isn't growing nearly fast enough to provide jobs for everyone. That's certainly not the whole reason for Egypt's crisis. But without big structural reforms, it's hard to see turmoil in the country from subsiding.

Have lawmakers ever wavered on giving aid before? Yes. In 2012, after Egypt elected Mohammed Morsi, who hailed from the Muslim Brotherhood, some lawmakers started to worry that Egypt would no longer see eye-to-eye with the United States, especially on topics like Israel. The relationship "has never been under more scrutiny,” said Rep. Kay Granger (R-Tex.), a key lawmaker in charge of foreign aid funds.

In the end, Congress put a few conditions on further aid. The 2012 appropriations bill, for instance, included language specifying that Egypt wouldn't receive any aid until the Secretary of State certified that the country was living up to its end of its 1979 treaty with Israel.

Isn't the United States supposed to cut off all military aid after a coup? In theory, yes. The Foreign Assistance Act, first passed back in 1961, says so quite clearly: "None of the funds appropriated or otherwise made available pursuant to this Act shall be obligated or expended to finance directly any assistance to the government of any country whose duly elected head of government is deposed by military coup or decree."

But the U.S. government has long been flexible on this provision. As my colleague Max Fisher detailed at length, "while the U.S. often does follow this law, it tends to ignore or bypass it when it sees key national security interests at stake – which may well apply in Egypt."

For instance, the Obama administration was slow in cutting aid to Honduras in 2009 after a coup there. And George W. Bush got a waiver to reinstate aid to Pakistan in 2001, even though then-leader Pervez Musharraf had pretty clearly come to power in a military coup.


John McCain (Jacquelyn Martin/File/AP)

So what's the debate now? On the one hand, there are experts and politicians who don't think the United States should be in the business of backing a military coup. "Morsi was a terrible president," said Sen. John McCain (R-Ariz.) "Their economy is— is in terrible shape, thanks to their policies, but the fact is the United States should not be supporting this coup and it's a tough call."

On the other, there are those worried that severing military aid to Egypt will create instability. "Cut off all aid immediately and you will take an economy that is already floundering and probably drive it into chaos, and that is not in anyone’s national security interests,” said Sen. Robert Menendez (D-N.J.)

At this point, the White House is still declining to call what happened in Egypt a "coup." “I’ll be blunt — this is an incredibly complex and difficult situation,” said Carney. Many political scientists have said what happened in Egypt is clearly a coup, but the White House is trying to avoid cutting off aid.

What would happen if we did cut off military aid? Probably not much at first. Military aid to Egypt for 2013 was already disbursed back in May, and there likely wouldn't be another round of funding until next spring. But cutting off aid would certainly reshape the U.S.-Egypt relationship — and mark a big break from the past 65 years.

Related: Confused about Egypt? An expert walks you through it.

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Neil Irwin | July 9, 2013