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Cablegate: Egypt: Next Steps On Assistance

VZCZCXYZ0017
RR RUEHWEB

DE RUEHEG #3366 3331555
ZNR UUUUU ZZH
R 291555Z NOV 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 7586
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0359

UNCLAS CAIRO 003366

SIPDIS

SIPDIS
SENSITIVE

STATE FOR NEA/ELA, NEA/RA, EEB/IFD
USAID FOR ANE/MEA MCCLOUD AND RILEY
TREASURY FOR MATHIASON AND HIRSON
COMMERCE FOR 4520/ITA/ANESA/OBERG

E.O. 12958: N/A
TAGS: PGOV ECON EAID EINV EG
SUBJECT: EGYPT: NEXT STEPS ON ASSISTANCE

REF: CAIRO 3365

Sensitive but Unclassified. Please protect accordingly.

1. (SBU) Visiting EEB PDAS Elizabeth Dibble met with Fayza Aboul
Naga, Minister of International Cooperation to discuss the future of
U.S. assistance. USAID Director Hilda Arellano also attended.
Aboul Naga said the GOE wants to move toward a "sustainable and
predictable" partnership based on "trade not aid." The GOE worked
diligently on the endowment/debt swap proposal Aboul Naga presented
in Washington. It is in both our interests to pursue the proposal,
as it will improve Egyptian public opinion toward the U.S. Aboul
Naga also noted the positive response on the Hill to the proposal.
Her interlocutors, including Congressman Ackerman, requested more
information on the proposal and, she asserted, were surprised about
the level of Egyptian debt service paid to the U.S.

2. (SBU) Dibble said the U.S. understands Egypt's desire for
predictability concerning assistance funds and would provide a
formal response to the Egyptian proposal soon. However, the
proposal will be difficult to accommodate. In response to Aboul
Naga's point about Egypt's debt service to the U.S., she noted that
total U.S. assistance to Egypt, including FMF, is still far greater
than Egypt's debt payments to the U.S. Moreover, an endowment/debt
swap agreement would require Congressional approval, something we
can not guarantee. Dibble also expressed concern about funding for
an endowment, as ESF will be cut to $200 million annually over the
next five years. Aboul Naga was especially concerned with this
latter point. She had told the Egyptian press upon her return from
Washington that ESF cuts were unacceptable to Egypt, as $200 million
would represent a 50% cut all at once, while the current agreement
reduces ESF by 50% over ten years. Aboul Naga is concerned that the
proposed cuts will only fund ongoing USAID bilateral projects and
leave nothing to shape the more "mature" partnership. Moreover, she
claimed, FMF money flows back to the U.S. as equipment purchases and
should not be counted as part of what Egypt receives.

3. (SBU) Dibble asked if the unobligated balances of the existing
cash transfer program came up in discussions on the Hill. Aboul
Naga said it had not, but made clear that the GOE was making
progress on the Financial Sector (FS) MOU benchmarks, many of which
would be met in 2008. Dibble suggested creation of a Cairo-based
bilateral steering committee that would comprise all the Egyptian
ministries with responsibility for implementing both the FS MOU and
the new Human Development MOU. Regular meetings of such a committee
with USAID and Embassy Cairo staff would ensure coordination and
timely reporting on progress toward meeting the benchmarks. Aboul
Naga agreed and said the GOE would welcome a chance to increase the
flow of information from both sides.

4. (SBU) In a separate meeting, Dibble raised the idea of a
bilateral steering committee with Manal Hussein, Deputy Minister of
Finance, who was also supportive of the idea. Hussein noted such a
committee would increase GOE intra-agency communication, which was
lacking. She noted, for example, that the Ministry of Finance had
not participated in development of the final Egyptian endowment/debt
swapping proposal before it was presented by Aboul Naga in
Washington.
RICCIARDONE

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