	Overview

Cash flow financing (CFF) is a statutory provision in the Arms Export Control Act that enables presidentially authorized recipients of U.S. foreign military aid to pay for U.S. defense equipment in partial installments over time rather than all at once. However, at times some lawmakers and observers have criticized the use of CFF, arguing that as a policy tool, it effectively commits Congress to future appropriations in order to pay for previously purchased, high-priced defense systems. Current Changes Proposed by the Obama Administration

As U.S. military assistance to Egypt has continued fairly steadily for over three decades, successive administrations have continued the practice of authorizing CFF for Egypt—until earlier this year. On March 31, 2015, after a phone call between President Obama and Egyptian President Abdelfattah al Sisi, the White House announced that, though the Administration was releasing the deliveries of select weapons system to Egypt that had been on hold since October 2013 (and pledged to continue seeking $1.3 billion in aid from Congress), "Beginning in fiscal year 2018, the President noted that we will channel U.S. security assistance for Egypt to four categories—counterterrorism, border security, Sinai security, and maritime security—and for sustainment of weapons systems already in Egypt's arsenal." This announcement had come after the Administration's lengthy review of U.S. foreign assistance policy toward Egypt, a process that began immediately following the Egyptian military's ouster of former president Mohammed Morsi, a leading figure in the Muslim Brotherhood. To date, there has been relatively muted public discussion of the President's proposed policy changes.
On March 31, 2015, after a phone call between President Obama and Egyptian President Abdelfattah al Sisi, the White House announced that beginning in FY2018, the United States would stop providing cash flow financing (CFF) to Egypt. Cash flow financing is the financial mechanism that enables foreign governments to pay for U.S. defense equipment in partial installments over time rather than all at once; successive Administrations have authorized CFF for Egypt since 1979.
In recent years, as public scrutiny of U.S. military aid to Egypt has increased, some observers have criticized the provision of CFF to Egypt. Critics argue that the financing of expensive conventional weapons systems is based on an assumption of future appropriations from Congress. Others argue that as the Egyptian military combats terrorism in the Sinai Peninsula and elsewhere, now may not be the optimal time to alter U.S. military aid to Egypt.
The Administration's proposed policy change comes after its lengthy review of U.S. foreign assistance policy toward Egypt, a process that began immediately following the Egyptian military's ouster of former president Mohammed Morsi, a leading figure in the Muslim Brotherhood.
The House draft FY2016 Foreign Operations Appropriations bill specifies that the Secretary of State shall consult with the Committees on Appropriations on any plans to restructure military assistance for Egypt.
This report analyzes this proposed change in U.S. foreign assistance to Egypt; it provides background on the history of CFF and reviews various issues for Congress. For more on U.S. policy toward Egypt, please see CRS Report RL33003, Egypt: Background and U.S. Relations, by [author name scrubbed].