U.S. Aid and Egypt: It's Complicated

On September 28, the Obama administration notified Congress that it would release $450 million in budget support funds to Egypt. The funds were part of $1 billion in debt relief for Egypt that the president announced in May 2011. The funds are not actually new foreign assistance or taxpayers’ dollars, but rather reallocations from regularly scheduled debt payments that Egypt already makes; instead of depositing them to the U.S. treasury, the funds are being allotted to support Egypt’s economy in this time of transition.

Debt forgiveness is one of several creative responses that the administration has utilized in last two years; the United States used almost $800 million in (mostly) already allocated funds to support civil society groups, elections administration, the formation of political parties, and direct budget support to the emerging governments in Tunisia, Egypt, and Libya. But while a plan for how entire $1 billion in debt forgiveness has not yet been finalized, the $450 million is meant to signal U.S. confidence and pave the way for Egypt’s agreement with International Monetary Fund (IMF) for a loan—negotiations which have been ongoing since March. Egypt will need to outline a plan to decrease its budget deficit in order to secure the IMF’s $4.8 billion loan, and the Obama administration has pledged to disperse another $260 million when the agreement is finalized before the end of the year.

But the plan to allocate $450 million of the $1 billion in debt forgiveness to support Egypt’s budget has not been welcomed in all quarters, with some balking at the idea of funding the country’s new Muslim Brotherhood-led government. Representative Kay Granger, who heads the House Appropriations Subcommittee on Foreign Assistance, pledged immediately that she would prevent the fund’s release; two days later, Representatives Ileana Ros-Lehtinen and Jim Jordan demanded to know whether the Obama administration meant to support the Muslim Brotherhood’s rise to power in Egypt, saying: “It is critical that these extremist groups [the Muslim Brotherhood] are not permitted to hijack the transition process and impose a new kind of totalitarianism in Egypt; if they do, the United States should not be funding them.” In response, the State Department has dispatched its own officials to Congress to assert the importance of aiding Egypt’s transition.