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John Kerry prods Egypt on economic reforms

Overhaul is key to secure $4.8b loan from IMF

Egyptian activists burned a poster depicting John Kerry outside the foreign ministry.

Amr Nabil/Associated Press

Egyptian activists burned a poster depicting John Kerry outside the foreign ministry.

CAIRO — John Kerry made his first trip to an Arab capital as secretary of state on Saturday, hoping to prod Egyptian politicians to forge a political consensus and commit themselves to crucial economic changes.

Egypt needs an economic overhaul to secure a crucial $4.8 billion loan from the International Monetary Fund. The United States and the European Union are prepared to provide hundreds of millions of dollars in additional assistance if Egypt can reach agreement with the IMF.

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Speaking to a group of Egyptian business leaders after landing in Cairo, he called the economic reforms ‘‘paramount, essential, urgent.’’ Egypt’s economy has teetered near collapse for months, with soaring unemployment, a gaping budget deficit, dwindling hard-currency reserves, and steep declines in the value of its currency.

The two years of tumult that began with the ouster of former President Hosni Mubarak also sharply slowed foreign investment and tourism, and economists say the Egyptian government urgently needs a cash infusion of several billion dollars to fend off the risk of an economic calamity that could lead to more unrest and instability.

The IMF has held on-again, off-again negotiations with Egypt for more than a year about providing the $4.8 billion. The fund’s loan is critical, economists say, because it would provide a seal of approval that Egypt’s economy is on a path toward self-sufficiency, allowing Cairo to obtain enough other international loans to fill in its deficit.

Economists familiar with the loan talks say that the fund’s US and European backers are eager to complete the loan to move Egypt toward stability, but that the fund has imposed two difficult conditions.

It has required the Egyptian government to commit itself to undertaking painful reforms like raising taxes and reducing energy subsidies.

It has also required a demonstration of political support for the reforms and the loan, to ensure that the government will honor its commitments in the future.

That calls for a dependable political process, as well a degree of consensus that Egypt’s political factions have been unable to sustain. There has to be ‘‘a basic political agreement among all of the various players in Egypt,’’ said a senior State Department official who traveled with Kerry.

Toward that end, Kerry plans to conduct an intensive series of meetings with members of the political opposition, the business community and ranking government officials.

Parliamentary elections are set to begin in April in Egypt. The major opposition group, the National Salvation Front, has announced it plans to boycott the vote to protest what it says is a push by President Mohammed Morsi and his Islamist allies to dominate politics.

The senior US official said that Kerry would not insist that the opposition participate in the election, but that he planned to make the argument that Morsi’s rivals need to participate in the political process if they want their views to be taken into account.

Kerry met with Amr Moussa, a former foreign minister under Mubarak and one of the leaders of the National Salvation Front, and spoke by phone with another leader of the group, Mohamed ElBaradei. Kerry is scheduled to meet with Morsi on Sunday.

The protests and street violence that have destabilized Egypt’s transition continued Saturday even as Kerry arrived for his visit.

The Egyptian state news media reported that a demonstrator in the Nile Delta city of Mansoura was killed when he was run over by an armored police vehicle.

Clashes between the police and protesters had broken out in the city several days ago and picked up Saturday after the killing. Dozens were injured, the state news media said.

Violence also flared up again in the Suez Canal city of Port Said, where the state news media reported that protesters had burned down a police station. The Port Said protests began Jan. 26 after 21 local soccer fans were sentenced to death for their role in a deadly riot at a match last year. Two police and more than 40 protesters were killed in the ensuing riots.

Residents have demanded a new trial for the soccer fans and retribution for those killed by the police.

Over the past month, however, the demonstrations in Port Said have blurred together with sometimes violent protests in several other cities along the Suez Canal or in the Nile Delta. Some protesters are angry at Morsi and the Muslim Brotherhood, accusing them of failing to deliver quickly enough on the anticipated rewards of the revolution, including economic benefits.

Kerry’s visit to Egypt is the sixth leg of a nine-nation trip through Europe and the Middle East. From Egypt, Kerry will travel to Saudi Arabia, the United Arab Emirates and Qatar before returning to Washington in the middle of the week.

In Ankara on Friday, Kerry waded into the controversy over comments by Turkey’s prime minister equating Zionism to a crime against humanity, rebuking the leader of the NATO ally by saying such remarks complicate efforts to find peace in the Middle East.

Kerry said the Obama administration found the statements by Prime Minister Recep Tayyip Erdogan ‘‘objectionable’’ and he stressed the ‘‘urgent need to promote a spirit of tolerance, and that includes all of the public statements made by all leaders’’ at a news conference in Ankara with Turkish Foreign Minister Ahmet Davutoglu.

‘‘We not only disagree with it; we found it objectionable,’’ Kerry said.

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