U.S. says ties with Egypt still strong after NGO row

WASHINGTON Sat Mar 3, 2012 1:09pm EST

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WASHINGTON (Reuters) - The United States on Saturday reaffirmed its backing for Egypt's efforts to get a $3.2 billion loan from the International Monetary Fund, despite the recent diplomatic standoff between Washington and Cairo over American pro-democracy activists.

Egypt, coming off the uprising that overthrew Hosni Mubarak who had ruled for 30 years, is in talks with the IMF for a loan to help it stave off a financial crisis.

"The United States continues to support the efforts of the IMF to conclude an economic reform and stabilization program with Egypt and remains in close touch with other donors on ways to assist the Egyptian economy," State Department spokeswoman Victoria Nuland said in a statement.

"Despite the recent strains, and differences on certain issues, the fundamentals of this strategic relationship remain strong," Nuland said. "The United States is also committed to ensuring Egypt's economic and financial stability."

In its loan negotiations, the IMF has asked Cairo to cut its budget deficit, line up aid pledges from other donors and secure support from its political forces.

The U.S. reassurances come after Egypt barred American staff of U.S.-funded pro-democracy groups from leaving its borders because of a dispute over the activities of non-governmental organizations.

The accusations and travel ban marked the deepest rift in U.S.-Egyptian relations in decades, and put $1.3 billion in annual U.S. military aid to Egypt at risk.

Nuland said the issue "is a matter of serious continuing concern for the United States."

Egyptian authorities had accused 43 workers, including 16 U.S. citizens, of working for groups receiving illegal foreign funding. Seven of the U.S. citizens, including the son of U.S. Transportation Secretary Ray LaHood, were in Egypt at the time and barred from leaving the country.

The U.S. government paid the bail for the U.S. citizens, which was set at about $330,000 each. The travel ban was lifted this week, and the Americans and other foreign workers involved left the country on a private plane on Thursday.

Egyptian officials proposed in February an 18-month economic reform plan that would coincide with the IMF program. These government officials face the contentious process of drafting a new constitution and holding a presidential election by the end of June.

(Additional reporting by Arshad Mohammed; Editing by Vicki Allen)

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