Egypt will use loans to help fund new French weapons

14 March 2016

Bilal Khan

Egypt will secure $3.76 billion U.S. in loans from France in order to fund its acquisition of various big-ticket French armaments. The move was recently approved by the Egyptian parliament.

Most of the funds will go into modernizing the Egyptian Air Force and Egyptian Navy, which are planning to induct numerous French weapon systems in the coming years.

In February 2015, the Egyptian Air Force ordered 24 Dassault Rafale multi-role fighters along with a large cache of advanced air-to-air and air-to-ground munitions. The total value of the deal amounted to about $6 billion U.S. The first three aircraft were delivered in July of the same year.

The Egyptian Navy ordered a DCNS FREMM multi-mission frigate (an advanced general purpose warship), two Mistral-class helicopter carriers, and four DCNS Gowind 2500 corvettes/light frigates.

According to Ahram Online, the total cost of Egypt’s arms acquisitions from France will amount to roughly 6.25 billion U.S. The loans will cover 60% of the upfront costs, the remaining 40% will be funded by Egypt through its national funds.

Despite the long-term uncertainty surrounding the Egyptian economy, the French government had agreed to guarantee Egypt’s loans. If Cairo fails to honour its payments, the French government will reimburse Egypt’s creditors.

Notes & Analysis

In addition to France, Egypt is also in the process of acquiring advanced weapon systems from Russia and Germany. For example, Egypt reportedly has 50 MiG-29M fighters and 46 Ka-52K attack helicopters on order from Russia. It is also having four Type 209 diesel-electric submarines being built in Germany.

Not only is Egypt in the process of replacing its old hardware, but through the acquisition of the FREMM, Gowind, Mistral, and Rafale, it is rapidly raising the qualitative capabilities of its armed forces.

For example, its Rafale purchase also includes the acquisition of capable active radar-guided beyond-visual-range air-to-air missiles (BVRAAM), i.e. the MICA-RF. Despite possessing a fleet of well over 200 F-16s, the Egyptian Air Force (EAF) does not possess the AIM-120, which is a critical mainstay munition, but a munition the EAF has not been able to secure from the U.S.

On the other hand, the FREMM and Gowind are high-quality surface warship designs, and will offer the Egyptian Navy robust multi-mission capabilities at sea. The Mistrals are power-projection assets meant for expeditionary missions, which is intriguing considering that the Egyptian Navy is still a defensively oriented force (even with its new surface ship acquisitions in mind).

Another open question is financing. In light of Egypt’s current economic situation and the uncertainly of its long-term economic health, it is interesting to see the French government back a financing agreement with Cairo. While Paris certainly has interests in supporting the French defence industry, the question of risk should have kept it on a more conservative footing. It is possible that France’s eagerness to extend loans is a reflection of its confidence in the likelihood of Egypt receiving aid from the Arab Gulf states, such as Saudi Arabia.