Western Nations Are Flooding Egypt With Billions Despite Cairo’s Limited Ability To Repay Its Debt

In March alone, the International Monetary Fund, the World Bank, and the European Union announced financial support for Egypt totaling more than $23 billion.

Egyptian Presidency Media Office via AP
The European Commission president, Ursula Von der Leyen, meets with Egypt's president, Abdel Fattah el-Sisi at the Presidential Palace at Cairo, March 17, 2024. Egyptian Presidency Media Office via AP

Beware of the billions of dollars in Western aid and investment headed toward Egypt to support the projects of President al-Sisi. Critics say such financing flies in the face of Cairo’s inability to pay back its foreign debts and its poor human rights record.

In March alone, the International Monetary Fund, the World Bank, and the European Union announced financial support for Egypt totaling more than $23 billion. The funds have been pledged in the name of supporting the country’s infrastructure, manufacturing, private sector, and border controls amid a dire need for economic reforms as poverty soars. 

Yet the economy in the Red Sea is eating into Cairo’s income, making it hard to repay its debts. Central bank data released on Thursday disclosed that Egypt’s foreign debts climbed by $3.5 billion in the last quarter of 2023. According to data reported in January, Houthi attacks caused the country’s Suez Canal revenues to plunge 40 percent.

“Egypt has made less progress reforming the large military-backed industrial sector, and its long-term debt sustainability is still in question,” economist Brad Setser, a senior fellow at the Council on Foreign Relations, tells the Sun.

“I don’t think there is any doubt that much of the investment has been motivated in part by a desire to support this government, and in part by a belief that there are important changes happening that will help the investments pay off over time.”

Egypt, with its Suez Canal, was once seen as the keystone of the Arab world. Even as it no longer is, foreign policy analysts fear that if it leaves the West’s orbit it could fall to China and Russia. Egypt is also a critical third party in American-led negotiations to secure the release of the hostages still being held by Hamas.

“I’ve worked very hard to make sure we have a relationship” with Egypt, President Biden said during a CNN interview last week in which he declared that America would stop providing artillery shells, bombs for fighter jets and other offensive weapons to Israel if it invades Rafah. Egypt has opposed such an invasion. 

It seems America sees its relationship with the most populous country in the region as too important to shake. The Biden administration is “putting all the pressure on Israel and none on Egypt,” a former Knesset member, Einat Wilf, tells the Sun. “Egypt has enjoyed many of the benefits of being a so-called Western ally at peace with Israel, but minimal to no obligations.” 

Ms. Wilf says that Egypt is failing to heed international standards that say a country should allow people fleeing from war to temporarily find refuge there. Though the country shares a border with Gaza, “everyone pretends it doesn’t exist,” she says. “The war could’ve been faster, more effective, Hamas defeated quicker, with fewer civilian deaths, had Egypt allowed the civilians to flee in an organized way to the South.”

The Camp David Accords, signed in 1978, outlined a framework for American support for Israel and Egypt. Israel received military and economic aid — the latter of which was phased out in 2007 as Israel’s economy grew stronger. Under the Accords, Egypt received substantial economic assistance, including aid to modernize its military. Today, that promise of symmetry hangs in balance.

Israel, since its founding, has received $81 billion in economic aid and $216 billion in military aid from the United States. The Israeli military is set to receive nearly $4 billion a year through 2028 — plus the $17 billion in defense aid recently passed for Israel amid its war with Hamas. That support outshines large foreign aid packages to other Middle Eastern countries — at least for now.

In September, the Biden administration approved $235 million in military aid for Egypt that it had previously withheld over concerns over the country’s repressive policies. The State Department cited joint U.S.-Egyptian military efforts that have sought to expand regional stability and therefore protect American national security.

Multilateral institutions have also come in with significant aid packages in recent months to revive a cash-strapped Egypt — and bolster Mr. al-Sisi. Since seizing power in a 2013 coup, he has come under heated criticism from human rights groups for ruling the country with an iron fist, stymying the economic rights of Egyptian citizens, and granting the military expansive powers over civilian life, among a host of other abuses.

“Now this abysmal repression is being rewarded with fresh support from the EU, including funds that will likely directly support the repression of migrants,” Human Rights Watch said in a statement. The Union is committing $8.1 billion in aid to Egypt and elevating the relationship between the two nations to a “strategic partnership.” That deal, Human Rights Watch says, worsens oppression and betrays “EU values.”

Egypt is also attracting a slew of fresh investors. The International Finance Corporation, a member of the World Bank Group, has committed more than $850 million in aid since the beginning of the 2024 fiscal year. Egyptian news outlets hail this as an effort to “propel Egypt’s economic growth” by bolstering its infrastructure, manufacturing companies, and financing for smaller enterprises. 

Among the Gulf states, investment is chiefly coming from the United Arab Emirates, which signed a deal with Egypt in February to develop a stretch of its coastline that would generate $35 billion to Cairo — and ultimately as much as $150 billion to Abu Dhabi. 

“If the financing came through as planned,” Goldman Sachs said in a note, “we believe this (along with an upsized IMF programme) should provide ample liquidity to cover Egypt’s financing gap over the next four years.”

As for America’s priorities in the Middle East, Ms. Wilf argues that while it’s true that the Arab world is more populous than the Jewish state, “economic development, forward-looking governance — those have to mean something as well.”

The New York Sun

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