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Halting aid to Egypt over military 'coup' would hurt US interests

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A second smaller stream is the so-called Economic Support Funds, which since the 2011 Revolution, have been allocated to pay down Egypt’s more than $2.5 billion in debt to the US. In other words, those funds are delivered in the form of a self-addressed check – a form of debt forgiveness that the US can use as a kind of “carrot.” Giving money to Egypt to pay down its US debt in this form allows the US to hold Egypt to International Monetary Fund conditions that would put its economy on a more stable path.

And finally there are smaller pots of money the United States allocates for democracy promotion, professional military education, and other programs.

Egypt is currently the fifth largest recipient of US assistance worldwide. This leads many policymakers to assume it is a great source of leverage for the US to influence the Egyptian government’s decisionmaking. This view overstates what the US can accomplish by threatening to withhold aid. For starters, US aid to Egypt pales relative to the $12 billion in aid the Arab Gulf states of Saudi Arabia, the United Arab Emirates, and Kuwait have pledged to Cairo over the past few days.

The most important limit on the leverage that Washington derives from its aid to Cairo is that in the past 25 years, assistance has fallen tenfold in relative terms. In 1986, US aid to Egypt was equivalent to about 7 percent of Egypt’s GDP. Today, it stacks up as less than 1 percent of Egypt’s economy.

Second, Egypt uses the military assistance it receives to purchase American hardware. Halting aid to Egypt means cutting off money that is ultimately captured by US defense contractors that produce the F-16s, M1 Abrams tanks, and Blackhawk helicopters that Egypt is acquiring.

As for the economic assistance, its impact is negligible. Disbursing the aid means the US can cancel the equivalent amount of Egypt’s debt whereas cutting off the aid means the debt remains outstanding but with no guarantee it will be repaid and no way to incentivize Egypt’s compliance with IMF conditions for its economic recovery.

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