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Egypt - Military Budget

Egypts defense spending will increase at an annual rate of 9.51 percent over the next five years to be valued at $8.5 billion in 2019, Business Monitor International said November 4, 2014. In a new market research report, Business Monitor International said during 2014 Egyptian military expenditure reached a value of $5.2 billion. The countrys increasing military expenditure is reflected in the ongoing modernization drive to counter threats of terrorism in the Sinai Peninsula, a strained relationship with Ethiopia, political turmoil following the recent democratic revolution and maritime security concerns over the Suez Canal,?the report said.

Budget allocation for Egyptian Armed Forces was set to increase by LE3.4 billion in 2013/14, military source told Ahram Online May 2013. The state budget allocation for Egypts military was set to rise by LE3.4 billion (approx. $0.5 billion) in the 2013/14 fiscal year to reach some LE31 billion (approx. $4.4 billion). According to Egypt's 2013/14 state budget, unveiled by the Shura Council (the upper house of Egypt's parliament, endowed with legislative powers), military allocations only represented between 3 and 4 percent of the total. The Egyptian military depended largely on annual US military assistance worth $1.2 billion to finance most of its arms purchases. Around 60 percent of the military budget allocation was spent on salaries, while the rest was earmarked for spare parts and arms purchases.

The United States has provided significant military and economic assistance to Egypt since the late 1970s. US policy makers have routinely justified aid to Egypt as an investment in regional stability, built primarily on long-running military cooperation and on sustaining the March 1979 Egyptian-Israeli peace treaty. For FY2013, President Obama requested $1.55 billion in total bilateral aid to Egypt ($1.3 billion in military aid and $250 million in economic aid). The aid levels requested were unchanged from FY2012 appropriations.

The burden of defense expenditures on the economy had long been difficult to assess because the military did not make this information public and did not provide details to the People's Assembly as part of the annual budget. Defense outlays were made public in 1983, when the minister of finance stated that the military would receive E2.1 billion (about US$3 billion at the 1983 rate of exchange) in fiscal year (FY) 1983. The amount was 22 percent higher than the amount for the preceding year and equaled 13 percent of total central government expenditures. In early 1989, Abu Ghazala indicated that military expenditures amounted to E2.4 billion or 10 percent of total government spending.

According to estimates published in The Military Balance, 1989-1990 by the London-based International Institute for Strategic Studies, Egypt's actual military expenditures were much higher than official figures. According to the institute, defense outlays amounted to about E4 billion in FY 1988 and E4.7 billion in FY 1989. The institute's estimates, however, did not include funds received directly from other sources, such as the United States, which contributed US$1.3 billion each year. The military also received an undisclosed amount from Saudi Arabia and earned foreign exchange from exports of domestically manufactured military equipment. The military reportedly produced as much as 60 percent of its consumable requirements (food, uniforms, and other goods) at its own farms and factories, but it was not clear whether the value of this production was fully reported in the budget.

According to estimates compiled by the United States Arms Control and Disarmament Agency (ACDA), Egypt's military expenditures fell to about US$4 billion annually between 1979 and 1981 because of Sadat's decision to cut the military budget by half in the wake of the peace accord with Israel. In 1982, the year after Abu Ghazala took office, defense expenditures rose sharply to US$7.4 billion, according to the ACDA. Defense expenditures tapered off during the subsequent five years to US$6.5 billion as the nation's mounting financial difficulties necessitated retrenchment in all budget categories. The ACDA estimates, calculated in constant 1987 dollars, included arms imports and foreign military aid.

The ACDA data also indicated that military expenditures as a share of gross national product (GNP) had fallen from 22.8 percent in 1977 to 9.2 percent in 1987. Military expenditures as a share of all central government expenditures had fallen from more than 40 percent in 1977 to 22.3 percent in 1987. Annual per capita military expenditures fell from US$229 in 1977 to US$126 in 1987 (expressed in constant 1987 dollars). Repayments on military credits extended by the United States, France, West Germany, Spain, Britain, and other countries amounted to about US$1 billion a year- -Egypt's total foreign debt-servicing obligations amounted to US$4 billion a year.

Compared with the Middle East as a whole, Egypt's defense expenditures were relatively modest. In 1987 average military expenditures in the region amounted to 11 percent of GNP and 32 percent of total central government expenditures. Per capita military expenditures in the region totaled US$396 (Syria, Iraq, and Iran were on a wartime footing when these figures were compiled).

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