* Kerry acknowledges Egypt's "extreme needs"
* U.S. aid dwarfed by budget deficit
* Egypt projects huge fuel price increases - source
* Big price rises would provoke public fury
By Arshad Mohammed and Alexander Dziadosz
CAIRO, March 3 The United States said on Sunday
it would give Egypt $250 million in budget aid after Egyptian
President Mohamed Mursi promised to take the painful economic
reforms needed to secure an IMF loan.
U.S. Secretary of State John Kerry announced the funding
after meeting Mursi and acknowledged Egypt's "extreme needs" as
the Islamist government struggles with a slide in currency
reserves to worryingly low levels and a soaring budget deficit.
Cairo says it wants to reopen talks with the International
Monetary Fund on a $4.8 billion loan which was agreed in
principle last November but suspended at Cairo's request due to
violent street protests the following month.
"In light of Egypt's extreme needs and President Mursi's
assurance that he plans to complete the IMF process, today I
advised him the United States will now provide the first $190
million of our pledged $450 million in budget support funds,"
Kerry said in a statement at the end of a visit to Cairo.
The $190 million is part of a $1 billion pledge by U.S.
President Barack Obama in 2011 after Egypt's popular uprising.
Kerry also said the United States would release $60 million
for an Egyptian-American Enterprise Fund, which is designed to
support small and medium companies in the private sector.
However, the U.S. diplomat hinted further aid will depend on
Egypt carrying out both economic and political reforms.
"The United States can and wants to do more," he said. "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."
A SPUR TO REFORM
Kerry described the funds as "a good-faith effort to spur
reform and help the Egyptian people at this difficult time". On
Saturday he said it was "paramount, essential, urgent" that the
economy get back on its feet.
However, the sum is dwarfed by the budget deficit, which is
growing rapidly as a slide in the Egyptian pound pushes up the
cost of subsidising energy and food, much of which has to be
imported using scarce dollars.
In a reform programme which Egypt is sending to the IMF, the
government targeted a deficit for this financial year of 189.7
billion Egyptian pounds ($28 billion) or 10.9 percent of
economic output. Even this assumes economic reforms are made,
and the deficit would hit 12.3 percent of GDP without such
action, it forecast.
Egypt's political and economic turmoil has frightened away
foreign investors and many tourists - a major source of the
foreign currency it needs to pay for wheat and fuel imports.
Two years after the fall of Hosni Mubarak, Egypt is deeply
split between the ruling Islamists and the leftist and liberal
opposition parties, most of which have announced they will
boycott parliamentary elections due to start next month.
On Sunday, a Cairo appeals court ordered that a politically
fraught retrial of Mubarak, his sons and top aides should begin
on April 23, nine days before the elections are due to begin.
Mubarak, the first Arab ruler to be tried by his people
after the uprisings that swept the Middle East and North Africa,
was jailed for life for ordering the killing of demonstrators in
2011, but was granted a retrial by a Cairo court in
As Kerry completed his visit, protesters and security forces
clashed in Cairo's Tahrir Square, centre of the revolution, as
police tried to clear demonstrators and open the square to
traffic, a witness said.
Unidentified assailants set fire to a police vehicle outside
the nearby Egyptian Museum, where the treasures of Ancient Egypt
are on display, the state news agency MENA reported.
Hundreds of people were also injured in the Suez Canal city
of Port Said during clashes between police and protesters there,
security and medical sources said.
Egypt's armed forces said on its Facebook page one military
officer was wounded when he was shot in the leg and one soldier
from the security forces was killed when he was shot in the neck
by "unknown elements".
APRIL IMF DEAL?
Finance Minister Al-Mursi Al-Sayed Hegazy was optimistic
that an IMF agreement could be sealed before the four-stage
lower house poll gets under way on April 22. "I expect and am
hopeful this deal can be made before the elections," he told
Economists are divided between those who see such a
timetable as over-optimistic and those that believe Egypt cannot
hold out much longer without help.
Foreign currency reserves tumbled to $13.6 billon in January
from $36 billion before the fall of Mubarak, and the Egyptian
pound has dropped 8.2 percent since the central bank began
auctioning dollars at the end of December.
Reserve figures due out this week are expected to show a
continuing slide further below $15 billion - the amount needed
to fund three months' imports, economists said.
However, the price of any deal is likely to be high. Egypt
is sending projections to the IMF of huge increases in gasoline
and diesel prices as it comes under pressure to curb soaring
energy subsidies, a cabinet official said on Sunday.
The government plans to continue subsidised fuel prices for
the most needy, under a rationing system to be implemented in
July. However, Egyptians excluded from this scheme would face a
jump in prices that could provoke public fury if implemented.
The official, who is part of the cabinet's economic team,
told Reuters the increases would be put to an IMF team once it
arrives in Cairo to negotiate the loan. "The new prices are
included in the economic reform programme that will be presented
to the IMF mission," said the official, who requested anonymity.
Petroleum Minister Osama Kamal was quoted by the state news
agency MENA as describing the figures as estimates and said that
no decisions had yet been made. According to the projections,
the commonly used 90 octane gasoline would leap to 5.71 Egyptian
pounds ($0.85) a litre from 1.75, while diesel would go up to
5.21 pounds from 1.10.