CAIRO: A report released by the Congress Research Service (CRS) has postulated that both the US and Egypt are seeking to end the annual aid that has been in place since 1979 and replace it with an endowment.
The CRS is the research arm of Congress, and develops reports which are submitted to Congress for consideration. The report stated that Egypt and the US had not agreed on the depreciation rate of the aid for the coming decade.
Currently, the annual aid depreciates by 5 percent every year regarding economic assistance, while military assistance remains unchanged. For 2009 economic assistance is budgeted to be around $200 million while military assistance will remain stable at around $1.3 billion.
The report, penned by researcher Jeremy M. Sharp and released last March, stated that Egypt preferred the creation of an endowment fund that would be used to finance mutual development projects.
“Due to the Egyptian economy’s strong macroeconomic growth, a growing desire for more US-Egyptian trade, and a reluctance by the Egyptian government to accept ‘conditions’ on US aid, US and Egyptian officials have expressed a desire to ‘graduate’ Egypt from US bilateral economic assistance, the report said.
“However, neither the United States nor Egypt seem to agree on how aid should be reduced over the coming decade. Egypt would like to establish an endowment to jointly fund development projects, it added.
Tariq Hussein, senior trader, MENA Equities, Naeem Holding, told Daily News Egypt that this proposal, if ever implemented, would mean that the US could have more control over where the economic assistance was directed.
If we are to assume that the capital for the fund will come mainly from the US, all this means is that they are trying to direct the money they are paying to the Egyptians themselves. So instead of giving the money to the Egyptian government who get to decide where some of the aid goes, they will be able to target specific sectors of the economy.
America will have a bigger say in our economy, they will play a huge role in the actual breakdown of where the aid goes, Hussein added.
Sharp said in the report, “Some analysts believe that the proposed endowment, which reportedly would be matched by the Egyptian government on a dollar-for-dollar basis, would serve as a substitute for the annual appropriations process and shield Egypt from potential conditionality agreements mandated by Congress.
“So far, the Administration has moved ahead with its own plans for reducing economic aid to Egypt, he added.
Economics expert at Al Ahram Center for Political and Strategic Studies Abdel-Fatah El-Gabaly welcomed the idea in principle, though he felt that details of the proposal were needed to make a proper judgment on it.
In principle it is a good idea, he told Daily News Egypt, at least it is no longer termed as aid but rather will be perceived as a project of cooperation which can only look good politically.
However we need to know what the conditions of this fund would be, who will be putting in the capital and whether there will be conditions attached to use of the fund, he added.
According to the report, the breakdown of the $200 million in economic aid for this year is: $110 million for education and health projects managed by USAID; $45 million for democracy programs, including direct grants to Egyptian NGOs; and $44 million as a direct cash transfer to help Egypt further liberalize its economy.
