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Egypt Capital Account and Capital Grants
http://www.photius.com/countries/egypt/economy/egypt_economy_capital_account_and_~26.html
Sources: The Library of Congress Country Studies; CIA World Factbook
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    The current account deficit was financed up to the late 1950s from previously accumulated reserves. As the reserves diminished, Egypt turned to external financing, which became the principal mechanism for covering the deficit. Some of the external financing sources were nondebt-creating, such as grants and foreign direct investment, whereas others, primarily loans, led eventually to heavy indebtedness. These items appeared in the capital account section of balance of payments transactions.

    In the late 1950s and the 1960s, capital grants came primarily from Eastern Europe; no reliable estimates exist for the period, because grants were often in kind and the currencies of these countries were not convertible. After the October 1973 War, Egypt began to receive large grants, mainly from Arab countries, to help with reconstruction and to compensate for the drain on the economy caused by years of military preparedness. In 1974 the grants were estimated at US$1.4 billion, but they declined in succeeding years to less than US$100 million in 1979. Between 1973 and 1976, annual Arab grants averaged roughly US$900 million. Sources of capital grants altered after the signing of the peace accords with Israel in 1979, with OECD members, especially the United States, replacing Arab nations. Some data indicated that between 1982 and 1988 official capital grants averaged US$903 million per annum. Other estimates suggested larger amounts.

    Military grants often supplemented economic grants. From the United States alone, military aid averaged US$1.28 billion per year in the period 1984 to 1988 (see Foreign Military Assistance , ch. 5). The United States probably granted Egypt over the same period US$953 million per year for civilian purposes, or about threequarters as much as it gave for the military.

    Capital grants were primary among nondebt-creating sources of external finance, but their future was unpredictable and would be influenced by political factors as well as by Egypt's economic performance. Whereas donor governments viewed grants as assistance, Egyptians tended to see them as mutual aid from which donor governments reaped political, strategic, and other dividends. It was unlikely, many experts believed, that the United States would increase its grants, given its own huge budget deficit, irrespective of political developments.

    Data as of December 1990


    NOTE: The information regarding Egypt on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Egypt Capital Account and Capital Grants information contained here. All suggestions for corrections of any errors about Egypt Capital Account and Capital Grants should be addressed to the Library of Congress and the CIA.

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