UPDATE 2-Qatar throws Egypt $2.5 bln lifeline to prop up pound
* Egypt rocked by rush for dollars after political turmoil
* Qatar seen as seeking influence in post-Mubarak Egypt
* IMF team expected in 2-3 weeks for talks on $4.8 bln loan
* Funds give government breathing space ahead of election
* Egypt, Qatar agree to speed up $18 bln in delayed projects
By Yasmine Saleh and Patrick Werr
CAIRO, Jan 8 (Reuters) - Qatar threw Egypt an economic lifeline on Tuesday, announcing it had lent the country another $2 billion and given it an extra $500 million outright to help control a currency crisis.
Political strife has set off a rush to convert Egyptian pounds to dollars over the past several weeks, sending the currency to a record low against the U.S. dollar and draining foreign reserves to a critical level.
The government said it expected an International Monetary Fund technical committee to visit Cairo in two to three weeks' time to resume talks on a crucial $4.8 billion loan to plug balance of payments and budget deficits.
Qatar's handout appears to be another example of the Gulf state seeking to deepen its influence in a Middle East being reshaped by revolts that have unseated long-serving autocrats. Doha supported the uprising in Libya and remains a major backer of the revolt against Syrian President Bashar al-Assad.
The aid is a political and economic bonus for both President Mohamed Mursi and the Muslim Brotherhood, the group that propelled him to power in a June election.
It eases the pressure on Mursi to negotiate an IMF agreement that will require him to implement unpopular austerity measures. That will be a relief for the Brotherhood as it gears up for forthcoming parliamentary polls.
"There was an initial package of $2.5 billion, of which $0.5 billion was a grant and $2 billion a deposit," Qatari Prime Minister Sheikh Hamad bin Jassim al-Thani told reporters, referring to the aid it has provided since Egypt's uprising two years ago.
"We discussed transferring one of the deposits into an additional grant so that the grants became $1 billion and the deposits doubled to around $4 billion," he said of the new aid after meeting Mursi.
Hamad added that the new Qatari grants and deposits with Egypt's central bank had all arrived. "Some of the final details with the deposits are being worked on with the technical people, but the amount is there," he said.
Abdulkhaleq Abdullah, a political analyst in the United Arab Emirates, said Qatar viewed Egypt as a valuable strategic asset and had invested more in the most populous Arab nation than any other Gulf Arab state since a popular uprising overthrew former President Hosni Mubarak in February 2011.
"Qatar wants a solid regional ally in Egypt," he said. "Along with Turkey, this allegiance or axis is fundamental to the regional role Qatar is trying to carve for itself."
The Qatari funds should help tide Egypt over until the government can seal the IMF agreement that analysts view as vital to give the government credibility with the markets.
The IMF's Middle East and Central Asia director, Masood Ahmed, left Cairo on Tuesday after meeting Mursi the day before.
"Negotiations with the IMF team will resume from where they stopped," Mursi's spokesman, Yasser Ali, said. Asked when the IMF's technical committee would visit Cairo, he said it was expected in the next two to three weeks.
The head of the IMF said the Egyptian government must strongly recommend the $4.8 billion loan agreement to its people as a step towards stabilising the economy.
"The IMF needs to have the commitment of the political authorities that can actually endorse the programme, own it, and propose it to the population as theirs," Christine Lagarde told Reuters during a visit to Ivory Coast.
Egypt struck an initial loan accord with the IMF in November but last month postponed the deal because of political unrest set off by Mursi's drive to fast-track a new constitution.
The unrest led Mursi to suspend increases in the sales tax on a range of goods and services that were deemed necessary to conclude an IMF deal.
Analysts said the Qatari funds gave breathing space to Mursi and to the Muslim Brotherhood's party from which he hails ahead of the election due to begin in the next few months.
"It's a big break for the Mursi government," said Shadi Hamid of the Brookings Doha Center. "It does give the Egyptian government more time to negotiate the (IMF) deal and build popular support for it."
Said Hirsh, an economist with Maplethorpe, said it was in no way a replacement to the IMF loan, as it was not conditional on implementing economic reforms sought by investors.
"Further delays to the IMF loan will not bode well for Egypt's external position. For now, foreign investors are still likely to sit and wait until a deal with the IMF is reached."
The Egyptian pound weakened to a record low of about 6.48 to the dollar on Tuesday after the central bank offered $60 million in the latest of a series of foreign currency auctions introduced in an attempt to contain the currency crisis.
The pound has weakened 4.6 percent on the interbank market and the central bank has spent a total of $420 million in the auctions since the system began on Dec. 30.
Foreign reserves have fallen by more than $20 billion and the currency has lost more than a tenth of its value and during the turbulent political transition since Mubarak's fall and the flight of tourists and investors, two Egypt's main sources of foreign exchange.
Qatar had already pledged enormous amounts of aid to Mursi's government since he became president in July, including four loans of $500 million each, with the first arriving in August and the last in December.
In September, Qatar also agreed to invest $8 billion for gas, power and iron and steel plants at the northern entrance to the Suez Canal and $10 billion for a giant tourist resort on the Mediterranean coast.
Sheikh Hamad said on Tuesday that these projects had been delayed, in part by a disagreement between Egyptian and Qatari technicians over systems and laws.
"Today we agreed to appoint an international specialised legal office to put a mechanism in place because these are huge projects and will last for long years and need accurate study."
Egyptian Prime Minister Hisham Kandil said progress on the projects had been held up by a lack of political will.
"I admit that there has been some slowness," he said.
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