Bush Can’t Promise More Aid to Egypt

Vice President George Bush praised Egyptian President Hosni Mubarak on Monday as a great friend of the United States but told him he could not promise the help Egypt wants in order to ease its worsening debt crisis.

Bush and Mubarak met for 2 1/2 hours at the Kubbeh presidential palace to discuss Mideast peace prospects, efforts by Egypt and Israel to settle a four-year-old border dispute and Egypt’s appeals for U.S. aid to help Cairo cope with a hard-currency shortfall that could exceed $5 billion this year.

Reliable sources said that because Bush brought no concrete ideas with him for advancing peace prospects, the talks focused more on Egypt’s economic situation, which has deteriorated rapidly in the past year because of the collapse of oil prices.

Scene of Rioting

The crisis is particularly urgent, in Egypt’s view, because new rioting could erupt if Egypt is forced to speed up the pace of an economic austerity program as urged by the United States, the International Monetary Fund and other potential lenders. Cairo was the scene of widespread rioting by security forces last February, and Egyptian officials have expressed fear that, without more U.S. aid, domestic unrest will grow and threaten the regime.

Talking with reporters, Bush lauded Mubarak as “a great friend of the United States” and said that Washington values its “very important relationship” with Egypt, its largest and closest ally in the Arab world. But he made it clear that the United States also has budget problems and cannot be expected to do more for countries like Egypt which, after Israel, is the second-largest recipient of U.S. aid.

“I am not here to cry poor mouth,” Bush told reporters, “but I think it is my responsibility to have foreign leaders understand that the United States faces very difficult budgetary times. Our foreign affairs budget is under fire in Congress.”

3 Egyptian Requests

Bush said he promised to take up Egypt’s case when he returns to Washington, but he indicated that he was unable to give Mubarak encouraging responses to three specific Egyptian requests.

Egypt faces more than $3.5 billion in debt service obligations this year; it seeks relief from high interest rates on $4.5 billion in military debts to the United States, and it wants Washington to convert $500 million of the $815 million it receives in economic project assistance into a cash grant.

Egypt has also asked the Reagan Administration to use its influence to help it obtain more lenient terms for $1 billion in standby credits from the IMF, which has been reluctant to agree unless Cairo carries out politically sensitive economic reforms.

A U.S. bank, Bankers Trust, has offered to help by agreeing to syndicate a $4.5-billion loan that would enable Egypt to refinance the military debt--incurred in the 1970s when interest rates were in the area of 14%--at current rates of about 7%. But first Egypt must overcome Treasury Department objections to the bank’s request that the U.S. government guarantee the loan.

Way Is Sought

Bush told reporters he has already discussed this with Treasury Secretary James A. Baker III, and that “perhaps there is a way.” However, he added, he is “not in a position to make any commitments” at this point.

The problem, other U.S. officials said, is the Treasury Department’s concern that making an exception for Egypt would lead to a flood of similar requests from other countries to refinance their debts at lower rates.

On the question of the IMF, Bush said he made it “clear to our Egyptian friends that we do not snap our fingers and have the IMF demonstrate the flexibility that some of our closest friends would like.”

Bush, indicating that economic issues dominated both his 90-minute private meeting with Mubarak and a one-hour session with aides present, said the Egyptian leader gave him “a very fulsome explanation . . . of the economic problems facing his people.”

The vice president said he and Mubarak also discussed Mideast peace prospects and efforts by U.S. mediators to help Egypt and Israel settle a four-year-old border dispute over the Red Sea resort of Taba, which Israel retained when it returned the rest of the Sinai Peninsula to Egypt under the terms of their peace treaty.

Condition of Settlement

Mubarak has made settlement of the Taba dispute the main condition for normalizing relations, frozen when Cairo withdrew its ambassador from Tel Aviv in 1982 to protest the Israeli invasion of Lebanon.

Assistant Secretary of State Richard W. Murphy has been shuttling between Egypt and Israel in recent days in an effort to reach an accord before Bush leaves for Washington today at the end of a 10-day tour that has taken him to Israel and Jordan as well as Egypt.

The two sides are described as being “very close” to a settlement after 15 months of arduous negotiations, but a cluster of highly technical details is still holding up agreement to submit the Taba dispute to binding international arbitration.

The Taba talks are to be resumed in Cairo today, and although the U.S. side has not given up all hope of being able to announce some sort of agreement before Bush leaves this afternoon, sources close to the talks concede that this now seems unlikely.