News / Africa

US Nears Deal for $1 Billion in Egypt Debt Relief

An Egyptian vender adjusts her veil in front of a giant poster of a US dollar outside an exchange office in Cairo, Egypt, March 28, 2011.An Egyptian vender adjusts her veil in front of a giant poster of a US dollar outside an exchange office in Cairo, Egypt, March 28, 2011.
An Egyptian vender adjusts her veil in front of a giant poster of a US dollar outside an exchange office in Cairo, Egypt, March 28, 2011.
An Egyptian vender adjusts her veil in front of a giant poster of a US dollar outside an exchange office in Cairo, Egypt, March 28, 2011.
The United States is close to a deal with Egypt's new government for $1 billion in debt relief as part of a U.S. and international assistance package designed to prop up the country's faltering economy and aid its transition to democracy.

A team of senior U.S. diplomats has spent the last week in Cairo finalizing the agreement, which has been delayed by Egypt's political turmoil and caution in Washington about rewarding its newly elected Islamist leadership. Egypt's debt to the U.S. exceeds $3 billion.

Senior American officials said Monday a final announcement is expected later this month.

U.S. President Barack Obama first pledged economic help for Cairo last year. Obstacles remained to completing the debt relief deal - which is reported to involve a mix of debt payment waivers and complicated "debt swaps."

The negotiations come as a trade delegation with representatives from nearly 50 U.S. businesses considering investment in Egypt is set to arrive at the end of the week. Under Secretary of State Robert Hormats, a former Goldman Sachs executive, will lead the group, which includes regional directors of companies such as Google, Boeing, Xerox and General Electric.

Economic turmoil

Egypt's Muslim Brotherhood-backed president, Mohamad Morsi, has said his first priority is to create jobs and shore up the country's struggling economy, which took a huge hit following the chaos of the 2011 revolution. The once-lucrative tourism industry, a major source of foreign currency, was particularly devastated.

Egypt's Central Bank has used up nearly two-thirds of its $36 billion foreign currency reserves to prop up the Egyptian Pound, The Wall Street Journal reported.

Two weeks ago, Morsi asked the International Monetary Fund for a $4.8 billion loan package. Saudi Arabia and Qatar have provided emergency support and China offered a $200 million loan.

Beyond the debt relief and IMF assistance, U.S. officials have proposed $375 million in financing and loan guarantees for American financiers who invest in Egypt, and a $60 million investment fund for Egyptian businesses.

Mutual suspicion

Under ousted president Hosni Mubarak, Egypt was one of America's top security partners in the Arab world and received an annual $1.3 billion in military aid.

While these programs have continued, much of Washington's non-military assistance for Egypt was put on hold after the January and February 2011 uprising that toppled Mubarak.

American funding for pro-democracy civil society groups in Egypt led to a crisis at the end of last year when Egyptian security officials raided the offices of several organizations, arresting their staff and accusing them of attempting to undermine the government.

The election in June of an Islamist government - followed by political upheaval and some unsettling international moves - raised additional questions about Mr. Morsi's reliability as a U.S. ally.

An evolving relationship

But American and Israeli officials have since sought to assure U.S. congressional leaders that ensuring stability in Egypt at a time of turmoil and change across the Middle East is vital to Western interests.

They have argued that persistently high unemployment could undermine Morsi's government. With Egypt seen as hugely influential in the Arab world, its economic recovery and political stability could exert a positive influence on other countries currently in flux, officials say.

While U.S. assistance has provoked suspicion among some Egyptian Islamist groups, the Muslim Brotherhood and Morsi have made it clear that fixing the country's $25 billion budget shortfall is their most urgent priority.

Hormats has praised Mr. Morsi’s early steps. “The groundwork has been set with a new political leadership, a new level of energy and new opportunities to reform,” he said in Cairo on Wednesday.

The Egyptian leader's scathing public criticism of Syrian President Bashar al-Assad during a visit to Tehran last week, which angered Iranian leaders, has also helped ease U.S. concerns.

Mark Snowiss

Mark Snowiss is a Washington D.C.-based multimedia reporter.  He has written and edited for various media outlets including Pacifica and NPR affiliates in Los Angeles. Follow him on Twitter @msnowiss and on Google Plus

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Comment Sorting
by: H. D. Schmidt from: California
September 06, 2012 2:38 PM
As a legal, yes, as a legal immigrant now going on 57 years, I am hereby "forced" to declare: More and more I find that there has never been a nation as stupid as dear old USA! Yes, handing out money like it grew on trees all over the world, while its national debt is and has been increasing by leaps and bounds under either administration. And yes while creating daily more and more enemies all over, right? You do not buy friends, it never worked and yet why in the hell is America doing it? Yes, while the Founding Fathers are and have been shacking in their graves. What I have learned about the Founding Fathers, is in reality the reason for writing the above. What is your reaction born Americans to what I said?
In Response

by: Pissed Guest from: WashingtonDC
September 11, 2012 7:13 PM
After I read how the Egyptians tore down US flag at US embassy on 9/11 just after US pledged a billion $US free money to help paying off their debt, I realize that this country is more screwed than most Americans could imagine. Total $US 2.6B going to the undeserved?
In Response

by: ali baba from: new york
September 09, 2012 12:56 AM
i agree, it is unbeliveable that us policy maker waste all this money on egypt especally it is ruled by muslim brotherhood which it is anti american ,anti western ,anti christan. 1.3 billion for militry aid.300 addition aid and now one billion relif.

by: Michael from: California
September 04, 2012 2:06 PM
The US is not giving money to Egypt, they owe us over 3 billion, the US is forgiving 1 billion of that debt. They are also sending deligations there to boost their economy and fix problems. Gee, maybe when that deligation is done over there they can come back to the US and do some work here, and how about some American worker debt relief. I went to school for almost a decade for an advanced degree, i have big debt (not that i want that debt forgiven, im a responsible financially conservative person), but i get taxed 33% or more on my paycheck, and with a loan payment of $1500 per month, and then rent, i literally make just $1,000 more per month than i did waiting tables before i went off to college.

Is there something wrong here? there is supposed to be some reward or incentive to spend a decade of your life in school to make something of yourself, but now that is all gone, how can this government expect people to make something of themselves if there is no incentive to do so from the beginning, especially when they just take so much money in taxes, keep me at a 8% student loan interest rate, and then give banks 0% interest rates (borrowing tax payer money = my tax money), and then forgive all these debts of foreign countries. I dont see any other countries or the UN for that matter forgiving US debt.

by: rd from: OCONUS
September 04, 2012 8:46 AM
That's right.... give the money to a foreign country instead of giving it to our own states relief. We give to much to foreign countries and we get NOTHING for it except loss of life and loss of respect.
In Response

by: lapazjim from: Arizona
September 05, 2012 9:44 AM
This is true!!!Our government is still giving billions in foreign aid to many other countries,but doing very little here.We need to understand that there are countries that need help feeding their population and that's fine.When we start giving them money is where the problems come in--its misused to buy weapons or other items it wasn't intended for or just flat out stolen buy that countries administration.One of the worst things that has happened to the US and helping these countries is that they turn against the US,but of course still want our money. Isn't it strange how the US helps so many countries in the world yet WE AS A COUNTRY ARE THE MOST HATED.Have the Saudi Arabs help out there brothers and with a lot of wishing and dreaming maybe Russia and China can lend in with monetary and food help to these countries.Instead of saying no to helping anyone all the time.

by: Anonymous
September 04, 2012 8:44 AM
This may be one of the dumbest things I've heard in quite some time.

by: US Citizen from: USA
September 04, 2012 8:35 AM
So one billion dollars to assist the Egyptian economy and our business working to develop jobs for Egypt. At US Citizen expense. With all the oil and money in the arab countries, why dont they take care of themselves. Why are we making the US Citizens pay for everyone's problems when we can't even take care of our own. Our economy needs a boost, we have people that need jobs. Why are we always selling out to other countries. Where does Egypt help us. Only politically does it interest us, the govenrment. A free vacation spot, a place to visit. Damn... no wonder we are struggling.....This has got to stop.
In Response

by: Joe from: Vegas
September 04, 2012 12:56 PM
How do you figure that each person in the US will get $400K by evenly dividing up $1 billion? Are you only including the 1%? 1 billion divided by a population of over 300 million is about 3 bucks each.
In Response

by: John Doe
September 04, 2012 8:45 AM
What the heck. America needs to take the Billion they want to give to Eqypt and distribute it evenly to all its citizens with a valid Social Security Card. Require bringing proof to validate citizenship at the local court house and get your money (about $400K per person). I think our economy would get spured if that happened.

by: Traveller from: Texas
September 04, 2012 8:28 AM
Is Obama borrowing the money from China?

by: Dr, Malek Towghi from: USA
September 04, 2012 7:13 AM
Two news items in today's (9.4.12) Egyptian "": *** A lawyer of the Muslim Brotherhood's ruling Freedom & Justice Party has filed a complaint to the interior ministry against the renowned Egyptian cultural center, El-Sawy Culturewheel, for hosting 'Satanist' rock bands and events. *** "Egyptian authorities have ordered the cancellation of Jewish New Year & Yom kippur celebrations at Alexandria's Eliahu Hanabi Synagogue ..." ***** Is this new $1 billion check from our tax money a reward for Egypt's Islamist rulers who are also in the process of dumping a Shariah-based constitution on the country and making Sinai Egypt's Waziristan????
In Response

by: Dr. Malek Towghi from: USA
September 04, 2012 5:48 PM
"Godwin from Nigeria", Just for the record and as a disclaimer, I don't share your reactionary Republican Tea Partyan NeoConian vulgar tone against Obama. I plan to vote for Obama-Biden as enthusiastically as I did last time. The curse of foreign aid which particularly the Muslim countries (except Jordan) consider a jizya tribute being paid to them -- Baaj-e Sebeel "moustache tribute/ blackmail money" in Iranian lingo -- Obama has inherited from the past, particularly Republican administrations. Remember Bush's largesse for Pakistan while it was protecting Bin Laden and rearming the Taliban -- which Obama is trying to make conditional. By the way, Pakistanis are openly praying for a Romney victory who has hinted to restore US largesse for the Islamic Republic.
In Response

by: Godwin from: Nigeria
September 04, 2012 12:27 PM
It is all taken care of by Obama. Why not? And he has assured Iran that USA is not going to fight alongside Israel in those areas. Just $1b reward is so that Egypt can buy enough arms in readiness to support Iran when trouble will start. Obama is a good schemer!

by: Anonymous
September 04, 2012 6:51 AM
How about some US debt relief?

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