Foreign Military Financing · 1 of 5
Foreign Military Financing, usually shortened to FMF, is United States money used to pay for defense articles and services bought by a partner government. The authority is section 23 of the Arms Export Control Act, which states that "the President is authorized to finance the procurement of defense articles, defense services, and design and construction services by friendly foreign countries and international organizations" (22 U.S.C. 2763(a)).
The manual describes what that finance looks like in practice. "FMF is used to finance FMS through direct credits, either repayable (direct loan) or non-repayable (grant)" (SAMM C9.7.2.10.2). The same chapter states that "the FMF program is a source of financing and may be provided on either a grant (non-repayable) or direct loan basis" (SAMM C9.7.2.1).
FMF is therefore not a separate way of buying. It is a way of paying for a purchase that still runs through the ordinary machinery of a Foreign Military Sales case.
The decision that a country receives FMF, and the execution of the money once appropriated, sit in different departments. The manual records the delegation on the Defense side: "the President has delegated to the Secretary of Defense the authority to issue grants and loans to eligible recipients in accordance with the AECA" (SAMM C9.7.2.10.2.1.3).
That authority is delegated again. The manual states that "this authority has been delegated to the Director, DSCA, in consultation with the Secretary of State and Secretary of the Treasury", with the exception of charging below market rates of interest (SAMM C9.7.2.1).
For a supplier or a partner tracing an approval, the practical point is that three departments have a hand in it. Defense executes, State sets the foreign policy frame, and Treasury is consulted on the financial terms.
FMF money does not arrive as a transfer to a finance ministry. It is applied to a Letter of Offer and Acceptance, and the term of sale on that agreement records how the case is funded. Where the funding is not enough to cover the case, the shortfall stays with the purchaser.
The mechanics of building the underlying case do not change. The request, the response, the agreement and the implementation run exactly as set out in how an FMS case is built. What changes is the source of the money and, as covered separately, what that source does to the price.
Most FMF pays for a government to government case, but not all of it. The manual records that section 23(h) of the Act and the annual State Department appropriation together allow FMF to fund direct commercial contracts for certain partners. Eligibility began with ten named countries and was later widened, "extending eligibility for FMF-funded DCCs to all NATO members and Major Non-NATO Allies" (SAMM C9.7.3).
The statute puts a ceiling on that route. It provides that "not more than $100,000,000 for such fiscal year may be made available for countries other than Israel and Egypt for the purpose of financing the procurement of defense articles, defense services, and design and construction services that are not sold by the United States Government" (22 U.S.C. 2763(h)).
For a supplier the distinction matters. Under the commercial route the contract is with the partner government and the money behind it is American. Under the government to government route the contract is with the United States. The two are covered in Foreign Military Sales or Direct Commercial Sales.
The manual carries a list of purchases that partners are steered away from making with FMF. Security cooperation offices "should generally discourage partner nations from using FMF funding for those items identified in Table C9.T10". Exceptions are allowed where the State Department finds the purchase critical to the mission, the bilateral relationship, or coalition operations (SAMM C9.7.2.10.6).
The list itself is instructive about what the program is for. Among the entries are "national budget support, including salaries" and "lease of defense article" (SAMM Table C9.T10). FMF is capital for equipment and the support around it, not a subsidy for running costs.
FMF levels are not decided in isolation each year. Section 25 of the Act requires an annual submission, and the manual describes it: "no later than February 1st of each year the President transmits to Congress, as part of the annual presentation of SA programs proposed for the next fiscal year, a report that provides an estimate of the aggregate dollar value and quantity of defense articles and services, military education and training, grant military assistance, and credits and guaranties to be furnished by the United States to each foreign country and international organization in the next fiscal year" (SAMM C9.7.2.10.2.1.1).
That report is the document a partner government and its suppliers should read first. It is where the following year's intentions are stated in public, country by country.
A country that stops paying an existing loan puts its wider assistance at risk. The manual quotes the annual appropriations provision that carries the rule: "no part of any appropriation provided under titles III through VI in this Act shall be used to furnish assistance to the government of any country which is in default during a period in excess of one calendar year in payment to the United States of principal or interest on any loan made to the government of such country by the United States pursuant to a program for which funds are appropriated under this Act", unless the President determines otherwise following consultation with the appropriations committees (SAMM C9.7.2.10.4.5).
The provision is renewed each year in the appropriations act rather than sitting permanently in the Arms Export Control Act, so its exact wording is worth checking against the current year before relying on it.
| FMF | Foreign Military Financing, authorized by section 23 of the Arms Export Control Act at 22 U.S.C. 2763. |
|---|---|
| Direct credit | The financing instrument, either repayable as a loan or non-repayable as a grant. SAMM C9.7.2.10.2. |
| Term of sale | The field on a Letter of Offer and Acceptance recording how the case is funded. |
| Section 25 report | The annual estimate transmitted to Congress by 1 February. SAMM C9.7.2.10.2.1.1. |
Every statement above links to the document behind it. The full source list for this piece is on the sources page.
This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.
Financing decides who pays. It does not deliver anything. Sentfore works at the point where equipment and people reach a difficult country and have to be moved, protected, housed and sustained. Its principals have worked on overseas defense and security programs in those environments. Requirements can be sent through the contact page.