U.S. plan for emergency Egypt aid hits roadblock

Reuters News

9/28/2012 6:11:41 PM - Reuters News

WASHINGTON (Reuters) - The Obama administration notified Congress on Friday that it planned to transfer $450 million to Egypt to help the country's new government, but the move was quickly blocked by a skeptical lawmaker who said she saw no immediate need for the cash infusion.

Representative Kay Granger, the Texas Republican who chairs the House of Representatives appropriations subcommittee for foreign operations, said the administration's $450 bailout proposal for Egypt was premature.

"This proposal comes to Congress at a point when the U.S. - Egypt relationship has never been under more scrutiny, and rightly so," Granger said.

"I am not convinced of the urgent need for this assistance, and I cannot support it at this time," she said, adding that she had put a hold on the funds.

Granger's action reflects unease among some U.S. lawmakers over the new Islamist government that has taken the reins in Egypt after a pro-democracy uprising overthrew longtime U.S. ally Hosni Mubarak last year.

The Obama administration has nevertheless vowed to push forward with a $1 billion aid package for Cairo, a point reinforced by Secretary of State Hillary Clinton this week when she met Islamist President Mohamed Mursi on the sidelines of the U.N. General Assembly meeting in New York.

The U.S. assistance proposal had languished during Egypt's 18 months of political turmoil. The country now faces a severe economic crisis including worsening balance of payments problems and an exodus of foreign investors that has left local banks shouldering much of the lending to the state.

The United States was a close ally of Egypt under Mubarak and gives $1.3 billion in military aid a year to Egypt plus other assistance.

Egypt was among the countries swept by violent anti-American protests over an anti-Islam video made in California, and some U.S. lawmakers have raised questions about the future of U.S. assistance, particularly given sharp budget constraints at home.

The Obama administration has argued that it is essential to buttress Egypt, the most populous Arab country and the first to sign a peace agreement with U.S. ally Israel.

Egypt has requested a $4.8 billion loan from the International Monetary Fund (IMF), a move the United States supports. Other countries are slowly making good on promises of assistance.

Saudi Arabia in June transferred $1.5 billion as direct budget support, approved $430 million in project aid and pledged a $750 million credit line to import oil products. Qatar has also promised $2 billion in support.

(Editing by Warren Strobel and Toni Reinhold)