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Egypt to 'review' foreign aid, rely on Gulf assistance: Officials

As US and EU threaten to withdraw aid in response to violent crackdown, Egyptian officials plan to restructure foreign assistance

Deya Abaza, Monday 19 Aug 2013
nabil fahmy
Egyptian Minister of Foreign Affairs Nabil Fahmy (Photo: Courtesy of AUC)
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Faced with international threats to withdraw financial aid in response to its crackdown on supporters of ousted president Mohamed Morsi, Egypt’s interim government is responding defiantly and pinning its hopes on continued assistance from the Gulf.

Several nations reacted to the clearing of two Cairo protests camps by Morsi supporters and members of the president’s Muslim Brotherhood by security forces on Wednesday, which left hundreds dead and many more injured, by leveraging their economic assistance to the cash-strapped Arab nation.

The European Union, which is meeting on Monday to discuss relations with Egypt, will likely suspend 5 billion euros ($6.7 billion) in aid pledged by the bloc last November, according to statements by European officials and experts in previous days.

For its part, the United States has, according to anonymous administration officials cited by the New York Times on Sunday, taken steps to suspend the $250 million in annual civilian economic aid to Egypt, while it debates the fate of the remaining $1.3 military assistance package.

Egypt’s response has been intransigent, going as far as to question the very necessity of such aid.

The outrage was most fiercely expressed by the Rebel campaign (Tamarod), which led the petition drive and the protests that led to Morsi’s ouster in July.

The military-backed movement launched on its official website a petition to demand the cancellation of both US aid and the 1979 Camp David peace treaty between Egypt and Israel, in a initiative labeled “Reviving National Sovereignty.”

The Egyptian government has naturally been more measured in its reaction, though no less resolute in condemning what it sees as an affront on Egypt’s national sovereignty.

Speaking at a press conference on Sunday, Foreign Minister Nabil Fahmy told reporters he condemned “attempts to internationalize Egypt’s problems” as well as “threats to stop assistance to Egypt” by members of the international community.

“As a result,” the minister went on defiantly, “I have tasked the concerned bodies in the Ministry of Foreign Affairs to review the foreign aid received by Egypt to decide whether this assistance is being used in the best interest of many and whether it achieves the hoped-for results.”

There is a belief among several Egyptian officials that a restructuring of the financial aid received by Egypt, in the form of grants, loans, and otherwise, is long overdue.

“Aid no longer represents what it used to in relation to GDP,” Assistant Minister of Foreign Affairs for Economic Affairs Magdy Rady told Ahram Online.

Ambassador Rady, who is to lead the review initiative, called it “a good opportunity to do some housekeeping” in regards to Egypt’s foreign debt, to shape a new strategy for the country’s future.

“This is above and beyond the fact that some nations are using aid as a tool to pressure Egypt, which is unacceptable,” said Rady.

Aid from Denmark, one of the first nations to announce the suspension of aid to Egypt after the sit-in dispersal on Thursday, amounts to a modest $5.3 million, in the form of two development projects with the Egyptian government.

“Even the economic aid provided annually by the United States, which twenty years ago represented a substantial portion of GDP, is now relatively negligible” said Rady, who did not hint which aid might survive the review process and which would not.

“Foreign aid, as a percentage of revenues in the budget, is certainly not what it used to be” a senior official in Egypt’s Finance Ministry confirmed to Ahram Online.

According to the official, Egypt has yet to receive any of the pledged 5 billion euros in EU aid, nor the slated annual $1.3 billion in American funds this year.

The EU funds had already been suspended under the Morsi administration for lack of democratic reform.

There are indications that Egypt plans to compensate for the loss in promised aid from international donors by more heavily relying on financial assistance from the Gulf.

“We will most likely rely instead on help from friendly Arab nations such as Saudi Arabia, the United Arab Emirates and Kuwait,” said the Ministry of Finance official.

Indeed, Saudi Arabia announced that Arab and Muslim nations would support Egypt even if other sources of aid withdrew in protest. 

"To those who have announced they are cutting their aid to Egypt, or threatening to do that, (we say that) Arab and Muslim nations are rich... and will not hesitate to help Egypt," Foreign Minister Prince Saud al-Faisal said in a statement carried by SPA state news agency.

The oil-rich Gulf nations hostile to the Muslim Brotherhood showered Egypt with aid pledges totaling $12 billion almost immediately after the country’s armed forced deposed Morsi in July.

The injection of cash provided a dramatic boost to Egypt’s foreign currency reserves, which jumped to $18.8 billion in July, after having dwindled to $14.9 billion after over two years of political turmoil since January 2011, when they had stood at some $36 billion.

Until then, Egypt’s economic hopes had been pinned on a $4.8 billion dollar loan from the International Monetary Fund, which Morsi’s government had painstakingly been trying to obtain through promised economic reform, to no avail.

But since July, several figures in the Egypt’s new cabinet have reiterated a preference for relying on Gulf aid, which has been abundant and comes with fewer strings attached.

In July, Finance Minister and former World Bank economist Ahmed Galal told reporters the IMF loan is “not a matter of life and death,” and was confident that Arab assistance would tide Egypt over for some time.

This belief was echoed by Planning Minister Ashraf El-Araby, who told Ahram Online that that he expected Arab assistance to hold Egypt over until the end of the year, after which the government would consider resuming talks with the IMF over the loan.

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