United States president Barack Obama's announcement that the US will relieve up to US$1 billion of Egypt's debt has prompted mixed reactions from economic commentators and analysts.
"We do not want a democratic Egypt to be saddled by the debts of its past,” said Obama in Thursday evening's address on the upheavals sweeping the Middle East and North Africa region, broadcast live from the US State Department.
He said America would work with Egypt to "invest these resources to foster growth and entrepreneurship".
The announcement drew applause from an audience gathered in Cairo’s Semiramis hotel for a screening of the speech. But elsewhere in the Egyptian capital some expressed disappointment.
“$1 billion is nothing, we were expecting total debt cancellation,” says Nadia Belhaj, senior economist at the Economic Research Forum. “Also, a debt deal which comes with some conditions should be received with caution."
Obama's announcement came around a month after an Egyptian financial delegation visited Washington DC to discuss the possibility of a total relief of Egypt’s $3.6 billion debt -- an issue on which Congress was internally divided.
“Actually, this debt is not the Egyptians’,” says Samir Soleiman, associate professor of political economy at the American University of Cairo, who blames Mubarak’s ousted regime for running up debts.
“The debt Egypt is heavily burdened with is a result of the US support for a dictatorial regime that in turn misused and misplaced the debt,” he says.
During Thursday 's speech, Obama said the US will change its economic policy toward the region, moving from aid to mutual trading.
"Drawing from what we’ve learned around the world, we think it’s important to focus on trade, not just aid; and investment, not just assistance," Obama announced.
Again, that doesn’t sound very encouraging to Egypt’s economists.
“It’s a good thing that one billion dollars were relieved from Egypt’s heavy debt,” says Soleiman. “But the intentions of the US administration which has formerly supported former dictatorship regimes cannot be trusted easily.”
Obama also stressed the US's policy will be to promote reform across the region and support transitions to democracy, again making the spread of 'American values' its key objective in the Middle East.
In trying to unite the current 'Arab Spring' uprisings under the US doctrine and philosophy, the president hinted that the announced aid packages cannot go without political and economic conditions.
"Although Obama used the words 'relieve debt', I’d say it’s a debt swap not debt relief. Relief is a more generous package: swap is conditional, it aims to direct investment in the way the US wants,” Magda Qandil, executive director of the Egyptian Center for Economic Studies told Ahram Online.
On Wednesday, the State Department released a statement saying the US was "designing a debt swap arrangement...swap[ing] it in a way that allows Egypt to invest these resources in creating jobs and fostering entrepreneurship”.
Navtej Dhillon, senior advisor with the US Treasury Department, told Ahram Online during a webstreamed press briefing that the new debt arrangement will free up Egyptian resources for reinvestment.
"We would be working with the Egyptian government and civil society to redirect those payments towards projects that have a development focus," he said.
This kind of ‘directing’ is what concerns commentators who are worried this might imply US interference in Egypt’s internal affairs.
“Any kind of intervention or conditions-based debt relief by the US is totally unacceptable," says Soleiman.
Magda Qandil, on the other hand, agrees with the use of an aid-control policy.
“They [the US] are not too generous in extending support that could be misused -- that’s very wise,” she says, recalling cases of debt misuse and corruption under Egypt's former regime.
Suzane Thabet, wife of former president Mubarak, has come under criminal investigation into her alleged misuse of foreign aid intended for development, including the famous Reading For All project.
“I want some constraints so that money won’t be lost in the name of stabilisation,” said Qandil, who calls the economic announcements very positive. “They’re kept very skillfully what’s necessary to help Egypt and help the US boost its image.”
Qandil believes the re-investment of 'relieved' funds may be centred on building low-cost housing, aiming to relocate residents of Egypt's poorer slums and create much-needed employment.
Nadia Belhaj of the Economic Research Forum seems more cautious about the upcoming rearrangement.
“Any debt swap has huge -- although some have positive -- implications, but there might be some real negative consequences," Belhaj told Ahram Online.
“It just means conditionality. That is: Egypt must abide by the conditions dictated by the US in terms of what development programs and what economic policies are to be adopted by the country.
“It’s true that a debt swap means less debt burden on Egypt, improved investment, more development programs, but we should remember that nothing is for free.”