Israel Matzav

US to forgive $1 billion in Egyptian debt

The United States will forgive $1 billion in Egyptian debt as part of a package that includes a $4.8 billion International Monetary Fund loan to the newly installed Islamist regime.

Nearly 16 months after first pledging to help Egypt’s failing economy, the Obama administration is nearing an agreement with the country’s new government to relieve $1 billion of its debt as part of an American and international assistance package intended to bolster its transition to democracy, administration officials said.

The administration’s efforts, delayed by Egypt’s political turmoil and by wariness in Washington about new leaders emerging from its first free elections, gained new urgency in recent weeks, even as the United States risks losing influence and investment opportunities to countries like China, which President Mohamed Morsi chose for his first official visit outside of the Middle East.

In addition to the debt assistance, the administration has thrown its support behind a $4.8 billion loan being negotiated between Egypt and the International Monetary Fund. Last week it dispatched the first of two official delegations to work out details of the proposed debt assistance, as well as $375 million in financing and loan guarantees for American financiers who invest in Egypt and a $60 million investment fund for Egyptian businesses.

The assistance underscores the importance of shoring up Egypt at a time of turmoil and change across the Middle East, from the relatively peaceful uprisings in Egypt and Tunisia to the still-unfinished transition in Libya, and from the showdown over Iran’s nuclear program to the war in Syria. Given Egypt’s influence in the Arab world, the officials said, its economic recovery and political stability could have a profound influence on other nations in transition and ease wariness in Israel about the tumultuous political changes under way.

There's just one small catch.... Congress has put some restrictions in place on aid to Egypt.

The administration is negotiating whether to waive some debt payments altogether or allow “debt swaps,” in which the money that would otherwise pay down the American debt instead is spent on training and infrastructure projects in Egypt intended to attract private investment and create jobs. Congress has attached conditions to American assistance in Egypt, requiring Secretary of State Hillary Rodham Clinton to certify, among other things, that the country continues to abide by its treaty with Israel.

American and Israeli officials, including Ambassador Michael Oren, have sought to assure members of Congress that assistance should proceed, despite reservations about the Muslim Brotherhood’s political rise, the officials said.

They have argued that persistently high unemployment, especially among women and young people, could undermine Mr. Morsi’s government, causing further instability in Egypt and beyond. “Things are going to head in the wrong direction if you don’t find a way to create jobs,” another administration official said, speaking on the condition of anonymity to discuss the administration’s internal strategy.

I wonder whether Egypt's liberal democracy advocates agree with that assessment. Hmmm.

Labels: Egyptian democracy, Egyptian economy, Mohammed Morsy, Muslim Brotherhood, US foreign aid

posted by Carl in Jerusalem @ 11:21 PM