–US To Guarantee Up To $1 Bln In Borrowing For Egypt, $1B Debt Swaps

By Brai Odion-Esene

WASHINGTON (MNI) – President Barack Obama Thursday will lay out an
ambitious long-term economic vision for the Middle East and North
Africa, embodied initially by a series of initiatives that senior
administration officials say will support countries undertaking the twin
challenges of economic transformation and democratization.

The president, for example, will announce debt swaps with Egypt
that — considering both the relief of debt and the investments that
will ensue — will amount to roughly $1 billion over a few years. He
will also announce loan guarantees for Egypt that will amount to roughly
an additional $1 billion.

There will also be additional financicing provided by multi-lateral
development banks.

According to officials, the announcement comes at a moment of
opportunity in the region, given the widespread movements for democratic
change that have swept through the Middle East and North Africa this
year.

“We see this as a critical time for the United States to take some
concrete actions, to demonstrate our committment to their future and o
reinforce their democratic transitions,” one official told reporters
during a briefing to preview parts of the president’s speech.

While the Obama’s speech will focus on a range of issues, not least
of which is the peace process between Israel and Palestine, the
officials chose to focus on economic programs at Obama will announced
that are aimed at boosting growth within the region “in support of
democratic change.”

In countries that are transitioning to democracy, like Egypt and
Tunisia, positive economic growth can help incentivize and support the
process, he said. This is why initial efforts will be focused on those
two nations, as they have already begun their democratic transitions.

To help Egypt meet it critical development needs, a second
administration official said the U.S. is developing new mechanism that
can essentially channel resources by cancelling debts from the past to
provide for future investments.

“It will reduce Egypt’s external debt burden and provide important
cashflow reflief,” the official said. It will also help address the
medium-term development needs of the Arab world’s largest country,
generating more private sector jobs.

The Obama administration, in an effort to help Egypt regain access
to global capital markets, will also guarantee up to $1 billion in
borrowing to finance infrastructure and support job creation.

The U.S. approach is based around what a third official described
as “four broad pillars.” The first is support for better economic
management — namely support on economic policymaking.

The second pillar is support for economic stability, the official
said, noting the series of “economic dislocations” that have occured as
part of the recent upheavals in the region, leading to a contraction of
economic activity.

Third is support for economic modernization and reform, he said,
particularly the development of a strong private sector that can create
jobs for young people.

The final pillar is developing a framework for trade integration
and investment. Without oil exports, the official noted, the cumulative
exports of the economies in the region equal those of Switzerland.

“We’ll be taking a number of step-by-step initiatives to facilitate
more robust trade within the region,” he said, as well as promoting
greater integration with the U.S. and Europe.

While the countries that form the MENA region are a very diverse
group, “the pace of economic reform is uneven,” the official noted. Some
countries have had substantial economic growth, he added, but the
benefits of that growth have not necessarily been widely shared.

“Successful transitions to democracy depend, in part, on strong
foundations for prosperity,” the official said. “Reinforcing economic
growth is an important way of reinforcing democratic transitions.”

During his regular briefing of the press Monday, White House Press
Secretary Jay Carney said Obama will use his speech as “an opportunity
to sort of step back and assess what weve all witnessed, the historic
change we’ve seen … as a moment of opportunity and an opportunity for
us to explain to the world … what policies this administration and
this country should pursue to support that change, to support the
democratic aspirations of the people in the region.”

“He’ll talk specifically about ways that we can best support that
positive change, while focusing on our core principles: nonviolence,
support for human rights, and support for political and economic
reform,” Carney said.

** Market News International Washington Bureau: 202-371-2121 **

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