U.S., IMF close to debt relief deals for Egypt

A man sells oranges in the Magra El-Oyoun market on January 24, 2012 in Cairo, Egypt. The country is struggling with falling tourism figures and rising unemployment following last year's revolution, which ousted President Hosni Mubarak.

The Obama administration is close to a deal to give Egypt about a billion dollars in debt relief as the country tries to rebuild its economy after the uprising. The Muslim Brotherhood took power in Egypt after elections in June, which put Muhammed Morsi in the president's chair.

The U.S. is also said to be backing a multi-billion dollar aid package for Egypt from the International Monetary Fund. The BBC's Jon Leyne says the package is currently set at $4.8 billion, up from $3.2 billion. The only problem seems to stem from Egypt's wariness of any conditions that might be attached the loan. Says Leyne: "Egypt's got to grapple with its severe budget problems. At the core of that are the subsidies, particularly the fuel subsidy, which means petrol gasoline and diesel and other fuels are extremely heavily subsidized. That's costing Egypt around $16 billion a year -- that's about a fifth of the Egyptian budget. And it's going up and up."

Dealing with the debt, though, would be extremely politically unpopular in Egypt, says Leyne. It would mean subsidizing industry, agriculture, almost every aspect of everyday life -- in a time when people are really suffering after the revolution last year and a dip in the Egyptian economy.

Leyne says the U.S. does seem to be interested in working with the new Egyptian government under Mohammed Morsi. "Washington is still very keen to give economic support to Egypt, and trying to keep this country stable and keep this country as an ally of the United States."

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