After the recent military ousting of president Morsi by the Egyptian military, the US has decided to put a cap on military aid to the tumultuous country. This is not the first time. Back in August, the U.S. had cut some of its economic aid to the Egyptian government. Cutting off military aid may have a louder effect, considering military aid to Egypt greatly surpasses economic aid. Thus far, the Egyptian government has been expectedly peeved in response to these actions.
With government aid in the news, it’s relevant to look at some of the other financial flows to Egypt. At CGP, we try to get a more complete picture of foreign assistance by looking at investment, philanthropy, and remittances.
With the recent turmoil, investment, the most fickle of the four flows, has subsided after the sharp rise in the spring of 2013. Much of this earlier rise came from neighboring Arab nations, after Europe and the US pulled out. Since the military takeover, sources suggest that all in all FDI has dried up and billions have been lost.
With investment down, that leaves two standing: philanthropy and remittances. Morsi’s stance on philanthropic flows to Egypt was not favored by most, and the military isn’t much better. The draft NGO law proposed in April not only put severe restrictions on domestic and foreign NGOs operating in Egypt, but also on any foreign funds received by NGOs. Under this law, all foreign funding required government approval and was labeled as “public” flows. Not surprisingly, this law has put significant pressure on Egypt’s civil society and on philanthropic flows to those organizations.
With government aid, investment, and philanthropy hard hit by the political turmoil, all that’s left is remittances. In international development, remittances are perhaps the most faithful of the flows, always holding steady in times of peace and in times of unrest. Just this month, the World Bank reported that remittances to Egypt have reached $20 billion in 2013, tripling since 2009. Compared to other MENA nations, the rise of remittances to Egypt has been by far the greatest. In fact, remittances are now three times greater than the amount of total revenue from the Suez Canal. With migration on the rise, many of the migrants from Egypt are based in Saudi Arabia, UAE, and other Gulf countries, and are regularly sending money back. It helps that the cost of sending remittances from these nations is much lower than the cost of sending money from Europe.
The political upheaval is unlikely to subside soon. Seeing that remittances play an essential role in strengthening a country’s balance of payments, keeping the corridors open is not only beneficial to the Egyptian population, but to Egypt as a nation.