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U.S. releases $250 million in aid to Egypt

By Jill Dougherty, CNN foreign affairs correspondent
updated 4:24 PM EST, Sun March 3, 2013
U.S. Secretary of State John Kerry talks with Egyptian President Mohamed Morsy at the presidential palace in Cairo on Sunday.
U.S. Secretary of State John Kerry talks with Egyptian President Mohamed Morsy at the presidential palace in Cairo on Sunday.
STORY HIGHLIGHTS
  • NEW: Egypt says it will impose reforms with or without IMF loan
  • Kerry releases $190 million to Egypt's government, $60 million for business
  • More money will come if Egypt implements reforms, Kerry says
  • Egyptian President Mohamed Morsy has pledged to take steps to secure IMF loans, he says

Cairo (CNN) -- Calling it a "good-faith effort" to help the Egyptian people, U.S. Secretary of State John Kerry released $250 million in economic aid Sunday, with a pledge of more if President Mohamed Morsy implements economic and political reforms.

Kerry's announcement came after a series of weekend meetings in Cairo with a cross-section of Egyptians and a two-hour session with Morsy on Sunday.

"When Egypt takes the difficult steps to strengthen its economy and build political unity and justice, we will work with our Congress at home on additional support," Kerry said in a written statement on the talks. But right now, Kerry said, Egypt needs help.

"In light of Egypt's extreme needs" and assurances by Morsy that he will take the steps necessary to obtain a major loan package from the International Monetary Fund, Kerry said the United States would provide the first $190 million of $450 million in already-promised support funds to the Egyptian government budget.

In addition, Kerry said, the United States will provide $60 million in direct support for an Egyptian-American Enterprise Fund geared toward Egypt's entrepreneurs and fund a higher-education initiative to help students, especially women, earn undergraduate degrees in science, technology, engineering and business.

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Kerry said he was banking on Morsy's assurances that he would implement "homegrown" reforms to help secure agreement with the IMF and "put Egypt on the path to establishing a firm economic foundation and allow it to chart its own course."

Morsy "agreed and said he plans to move quickly to do so," Kerry said.

But Kerry is not releasing all of the $1 billion the Obama adminstration pledged to Egypt in May 2011, after the democratic revolution that toppled longtime strongman Hosni Mubarak.

In addition to Sunday's $190 million, there is an additional $260 million in budget support funds still pending. And in a separate tranche of money, there is a further $550 million for scholarships and loan guarantees. Release of these funds will depend on Morsy's following through on political as well as economic steps.

"The brave Egyptians who stood vigil in Tahrir Square did not risk their lives to see that opportunity for a brighter future squandered," Kerry said. "The Egyptian people must come together to address their economic challenge."

Egypt's heavily tourism-dependent economy went into a tailspin when the revolution began. The IMF has offered $4.8 billion in loans to help revive the country's economy, under conditions that Egypt overhaul its finances, cut energy subsidies, raise taxes and reduce its budget deficit.

Kerry said Washington -- long Egypt's leading ally -- still has concerns about free and fair elections, human rights, police conduct, clampdowns on nongovernmental organizations and other problems that beset Egypt's troubled transition to democracy.

"It is clear that more hard work and compromise will be required to restore unity, political stability and economic health to Egypt," Kerry said. "The upcoming parliamentary elections are a particularly critical step in Egypt's democratic transition."

Egyptian Finance Minister Almorsy Hegazi said Sunday that he expects an agreement between Egypt and the IMF to be clinched before parliamentary elections on April 22.

But some prominent members of Egypt's opposition have doubts about accepting IMF aid because of the strings attached to it. The April 6 youth movement said the loan "puts the people in severe austerity measures." Labor syndicates, independent think-tanks and Popular Party leader Hamdeen Sabahy have opposed IMF assistance.

The conservative Islamic Salafist bloc opposes the loans because they require Egypt to pay interest, a violation of their interpretation of Islam, bloc spokesman Abdelmenem Shahat said. Former foreign minister and Arab League chief Amr Moussa said in February that he supports the IMF package, but is "against relying heavily on the loan only." Moussa called for an international conference to help lift the economy.

But many businessmen want the country to go ahead with the loan as soon as possible. And Hegazi said the government's reform program includes sections about social justice, fighting corruption and tax reforms and that it would be implemented whether or not Egypt comes to terms with the IMF.

CNN's Amir Ahmed contributed to this report.

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