Kerry Presses Egypt to Reform Economy or Lose Aid

Image: Kerry Presses Egypt to Reform Economy or Lose Aid U.S. Secretary of State John Kerry meets with Egyptian President Mohammed Morsi in Addis Ababa, Ethiopia on May 25.

Monday, 27 May 2013 07:23 AM

 

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ADDIS ABABA, Ethiopia — Secretary of State John Kerry urged Egypt to act swiftly on economic reforms to secure a $4.8 billion International Monetary Fund (IMF) loan, saying the measures were needed to get more aid from Congress, an American official said Sunday.

Kerry met Egyptian President Mohammed Morsi for about an hour on the sidelines of an African Union summit on Saturday, discussing Syria's civil war, the Israeli-Palestinian conflict, human rights in Egypt, and the country's faltering economy, the official said.

Egypt's Islamist-led government has been resistant to introducing the austerity measures needed to win the IMF funding, including raising taxes and cutting fuel subsidies, fearing such painful reforms could provoke social unrest.

However, an IMF deal could help shore up investor and donor concerns after two years of political instability since the overthrow of former president Hosni Mubarak in early 2011. The instability has depressed tourism, a crucial industry for Egypt.

The U.S. official, who spoke on condition of anonymity, said Kerry had made the argument that the reforms were necessary to persuade American lawmakers to proceed with further economic support for the country, which borders U.S. ally Israel.

"He urged action on making reforms happen now to move towards requirements to get the IMF package," the official said.

During his first visit to Cairo as secretary of state, on March 3, Kerry told Morsi the United States would provide the first $190 million of $450 million in pledged budget support because of Morsi's commitment to see the IMF process through.

The remainder, however, would depend on the economic reforms, a point Kerry made again in the Ethiopian capital.

"He said . . . we need to be able to show Congress that you have taken the necessary reforms," said the official. "I have been a strong advocate of support for Egypt. I continue to support aid for Egypt, but . . . we need to see reforms in place that will encourage my former colleagues back at home to act."

Kerry served in the Senate for nearly 30 years before becoming the country's top diplomat on Feb. 1.

Egypt has in recent years received about $1.3 billion in military aid from Washington, support that dates back to its signing of a peace treaty with Israel more than 30 years ago. That assistance, however, is not seen as contingent on Egyptian economic reform.

© 2014 Thomson/Reuters. All rights reserved.

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