CAIRO — The United States is nearing an agreement with Egypt’s new government to eliminate a significant portion of the $3.2 billion owed by the economically struggling nation, U.S. officials said Monday. The discussions are the first major negotiation between the Obama administration and Egypt’s new democratically elected leaders.
U.S. officials have been in Cairo since last week hammering out the details of the debt relief package, which could approach $1 billion, a goal previously announced by the Obama administration. A final announcement is expected this month, according to a U.S. official speaking on the condition of anonymity because the agreement is not finalized.
Egypt’s political turmoil had slowed American assistance even as the Egyptian economy struggled in the year-and-a-half since protests forced longtime Egyptian President Hosni Mubarak to resign. Egypt is facing crippling poverty, rising inflation and a surge of young people who will need jobs in coming years. Its foreign currency reserves were depleted after they were used to prop up its economy.
American officials have been cautious about how to aid Egypt’s volatile political transition, and at times Egypt has been cautious about taking U.S. money. Mohamed Morsi was sworn in as the country’s first freely elected president on June 30, leaving questions about how the Muslim Brotherhood leader would relate to the United States.
But Morsi has said that his first priority is to revive the economy, and he has appeared to welcome assistance from the United States and the International Monetary Fund, both of which are controversial in Egypt. IMF Managing Director Christine Lagarde was in Cairo last month for negotiations with Morsi, who has requested a $4.8 billion loan package from the international body. He has also sought support from China and oil-rich Gulf countries.
The American delegation that arrived in Egypt last week has been working to send more help, while encouraging Egypt to enact market liberalizations and other measures that would make it easier to do business in the country.
“The United States is working to help relieve Egypt of part of its immediate fiscal and balance-of-payments pressure in support of the Egyptian government’s own, home-grown reform plan,” Undersecretary of State Robert D. Hormats said in a speech at the American Chamber of Commerce in Egypt last week after meeting with Egyptian officials.
Hormats said that the U.S. government was offering $250 million in loan guarantees for small and medium-sized businesses, and at least an additional $219 million for loans and other investments in small businesses. Much of the money for the U.S. debt-relief package would come from funds that had previously been allocated for aid to Egypt and Afghanistan but were not spent.
Much of the U.S. non-military aid destined for Egypt was put on hold after the January and February 2011 protests that toppled Mubarak, especially after the cabinet minister responsible for international aid and investment pushed for the prosecution of employees of several non-governmental organizations funded by the United States. But the Morsi government has replaced her, and American officials say that her successor appears to be more receptive to American aid.
The Obama administration had previously committed to relieving $1 billion of the $3.2 billion that Egypt owes the United States, though Egypt has sought to eliminate all of it. With both sides trying to bolster Egypt’s economy and ease its transition to democracy, a U.S. trade delegation is set to arrive at the end of the week with representatives from more than 40 American companies considering investments in the country.