U.S. poised to forgive $1B in Egypt debt

Sept. 4, 2012 at 3:00 AM
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WASHINGTON, Sept. 4 (UPI) -- The White House is near a deal to forgive $1 billion in Egyptian debt as part of a plan to bolster Egypt's move to democracy, administration officials said.

The pending deal, first reported by The New York Times, would come nearly 16 months after President Barack Obama pledged up to $1 billion in debt relief for Egypt in a State Department speech.

Obama also said in his May 19, 2011, speech Washington would "help Egypt regain access to markets by guaranteeing $1 billion in borrowing that is needed to finance infrastructure and job creation."

U.S. officials told the Times they have since been surprised by how open Egyptian President Mohamed Morsi and his advisers are to economic changes and creating jobs.

"They sound like Republicans half the time," one administration official said, referring to leaders of Morsi's Muslim Brotherhood political party. The brotherhood movement was long barred under President Hosni Mubarak, a former U.S. ally who was deposed in February 2011.

The $1 billion in pending debt relief is being put together from earlier aid money that wasn't spent, the officials told the Times.

The White House and State Department had no immediate comment.

Egypt's debt to the United States is more than $3 billion, with most coming from a U.S. Agency for International Development program called Food for Peace. The program was worked out for Egypt after the 1978 Camp David Egyptian-Israeli peace accords and included loans to buy U.S. agricultural products.

The Obama administration is also negotiating $375 million in financing and loan guarantees for U.S. financiers who invest in Egypt and a $60 million investment fund for Egyptian businesses, the Times said.

The administration additionally supports a $4.8 billion loan being negotiated between Egypt and the International Monetary Fund, officials said.

Egyptian Prime Minister Hesham Qandil has said he hopes the loan will be completed by the end of the year.

Washington's assistance underscores the importance of strengthening and stabilizing Egypt when much of the Middle East is experiencing turmoil and change, officials told the Times.

An economically strong and politically stable Egypt could influence other nations in the region and ease Israel's concerns about the political changes in several Arab countries, they said.

Other countries offering assistance to Egypt include Saudi Arabia and Qatar, which are giving a total of $3 billion. China offered Morsi a $200 million loan for Egypt and signed agricultural and telecommunications investment contracts when Morsi visited Chinese counterpart Hu Jintao in Beijing last week.

The United States has donated some $30 billion in aid to modernize Egypt's economy over the past 30 years.

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