* Kerry on first visit to Arab world since taking office
* Egypt needs to cut energy subsidies - senior U.S. official
* IMF loan agreed in principle but delayed by violence
* Opposition to boycott lower house elections
By Arshad Mohammed
CAIRO, March 2 U.S. Secretary of State John
Kerry will stress the importance of Egypt reaching an IMF loan
agreement and the need for political consensus on painful
economic reforms, a senior U.S. official said on Saturday.
Kerry arrived in Egypt on his first visit to the Arab world
since taking office for talks with the leaders of a country that
is mired in political and economic crisis two years after the
overthrow of autocrat Hosni Mubarak.
With Egypt's pound and foreign currency reserves sliding,
the official said that if Cairo could agree on a $4.8 billion
loan from the IMF, this would bring in other funds from the
United States, European Union and Arab countries.
However, the official said Kerry believed Egypt needed to
increase tax revenues and reduce energy subsidies - measures
that are likely to prove highly unpopular with a people
struggling during the country's crisis.
"His basic message is it's very important to the new Egypt
for there to be a firm economic foundation," the official told
reporters as Kerry flew to Cairo.
"In order for there to be agreement on doing the kinds of
economic reforms that would be required under an IMF deal there
has to be a basic political ... agreement among all of the
various players in Egypt," the official said on condition of
Egypt said on Thursday it would invite a team from the
International Monetary Fund to reopen talks on the loan and the
investment minister expressed hope that a deal could be done by
the end of April.
The loan was agreed in principle last November but put on
hold at Cairo's request during street violence the following
month in protest at a planned rise in taxes.
While the tax rise was withdrawn, Islamist President Mohamed
Mursi is likely to face violent protests on the streets as any
cuts in subsidies demanded by the IMF which will push up living
costs in a country where poverty is rife.
HEAVY SUBSIDY COST
Energy subsidies soak up about 20 percent of the government
budget, bloating a deficit which is expected to soar to 12.3
percent of annual economic output this financial year unless the
government takes urgent action on reform.
Kerry will stress the need for agreement across the
political spectrum on reforms and winning approval in the Shura
Council, Egypt's upper house of parliament.
"What they need to do is ... things like increasing tax
revenues, reducing energy subsidies, making clear what the
approval process will be to the Shura Council for an IMF
agreement, that kind of thing," said the official.
Hopes for political consensus between the ruling Islamists
and opposition parties seem slim. Liberal and leftist opposition
parties have announced a boycott of parliamentary elections,
scheduled for April to June, over a new constitution produced by
an Islamist-dominated assembly and over other grievances.
Kerry is due to meet opposition leaders on Saturday but the
list of participants is missing many senior figures, including
Hamdeen Sabahy, who came a close third in presidential elections
last year and former U.N. nuclear agency chief Mohamed
Egypt's foreign currency reserves have fallen to not much
more than a third of their level before the 2011 revolution and
the Egyptian pound has lost more than 8 percent against the
dollar since the end of last year.
Kerry would not explicitly tell the opposition parties to
renounce their boycott of the lower house polls, the official
However, the official added: "If they want to engage, if
they want to assure that their views are taken account, the only
way to do that is to participate. That they can't sit aside and
just assume that somehow by magic that all of this is going to
happen ... They've got to participate."