The United States as ‘International Broker’: Egypt’s Ailing Economy and Opportunities for Support

by Mustansir Barma, May 2013

For a full text copy of the brief, click here. 

In some circles in Washington, frustration with the trajectory of Egypt’s political transition–coupled with fears of Islamists rising to power and a desire to cut foreign aid due to domestic budgetary constraints–threatens to result in diminished U.S. engagement with Egypt and a withdrawal of support for its fragile transition. Uncertainty regarding Egypt’s future has caused delays in the delivery of U.S. foreign aid to Egypt and spurred calls for maintaining a strategic “pause” in such aid moving forward. Likewise, U.S. and other foreign investors remain reticent to become involved in Egypt during its fragile and tumultuous transition.

Policy Recommendations

  1. Use its influence to help mobilize pledged international support and Egypt’s economic reform program. Recognizing that the United States is grappling with its own fiscal constraints, Washington can still play a pivotal role by using its clout with international financial institutions to reach conclusion on loan agreements.
  1. Institute a regular and structured ‘Strategic Economic Dialogue’ focusing on trade and investment promotion. The United States can initiate a high-level bilateral forum to make headway on economic issues.
  1. Relieve all of Egypt’s $2.7 billion in debt owed to the United States. Although Egypt incurred most of its debt more than two decades ago and has since already repaid the principal several times over, the remaining debt is a significant burden on Egypt’s beleaguered economy.
  1. Continue regular assistance programs and expedite delivery of funds.
  1. Encourage Egypt’s neighbors to support Egypt responsibly. The Egyptian government is unlikely to proceed with serious economic reform if handouts from regional countries continue on an unsystematic basis, and such funding spurts might create false friends and dependency.
  1. Promote participatory budgeting. A proven success in various parts of the world, participatory budgeting engages a marginalized populace and provides citizens a voice in determining which programs their tax payments support.
  1. Work with other arms of government and private organizations to support Egypt’s economy. Government agencies such as the Overseas Private Investment Corporation (OPIC) are helping Egypt’s entrepreneurs through a partnership with regional private equity group Abraaj Capital, signed in September 2012. Congress should support expansion of such partnerships.

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