CAIRO (Reuters) - Secretary of State John Kerry will stress the importance of Egypt achieving political consensus for painful economic reforms needed to secure an IMF loan, a senior U.S. official said on Saturday.
Kerry arrived in Egypt on his first visit to the Arab world since taking office for talks with the leaders of a country mired in political and economic crisis two years after the overthrow of autocrat Hosni Mubarak.
With Egypt's pound and foreign currency reserves sliding, the official said that if Cairo could agree on a $4.8 billion loan from the IMF, this would bring in other funds from the United States, European Union and Arab countries.
However, the official said the United States believed Egypt needed to increase tax revenues and reduce energy subsidies - measures likely to be highly unpopular if the Muslim Brotherhood government of President Mohamed Mursi forced them through.
"His basic message is it's very important to the new Egypt for there to be a firm economic foundation," the official told reporters as Kerry flew to Cairo.
"In order for there to be agreement on doing the kinds of economic reforms that would be required under an IMF deal there has to be a basic political ... agreement among all of the various players in Egypt," the official said on condition of anonymity.
Egypt said on Thursday it would invite a team from the International Monetary Fund to reopen talks on the loan and the investment minister expressed hope that a deal could be done by the end of April.
The loan was agreed in principle last November but put on hold at Cairo's request during street violence the following month that flared in protest at a planned rise in taxes.
While the tax rise was withdrawn, Mursi is likely to face violent protests as any cuts in subsidies demanded by the IMF will push up living costs in a country where poverty is rife.
Energy subsidies soak up about 20 percent of the government budget, bloating a deficit set to soar to 12.3 percent of annual economic output this financial year.
CLASHES IN EGYPTIAN CITIES
A small group of anti-Mursi demonstrators marched from Cairo's Tahrir Square, the center of the 2011 uprising, to the foreign ministry to protest about Kerry's visit.
Some held up cartoons of Kerry, portraying him with an Islamic beard, saying "Kerry - member of the Brotherhood". Others banners said "Kerry, you are not welcome here" and showed the characteristic moustache and fringe of Adolf Hitler superimposed on pictures of Mursi.
The protest at the ministry, where Kerry is due to meet Foreign Minister Mohamed Kamel Amr later, was peaceful.
However, youths fought interior ministry police on Saturday in the Nile Delta city of Mansoura, where one protester was killed and dozens injured. In the Suez Canal city of Port Said, protesters torched a police station, security sources said.
While these protests were unrelated to Kerry's visit, they were examples of the frequent outbreaks of unrest faced by Egypt's government.
Clashes are commonplace, with protesters demanding that Mursi reform the interior ministry's police force. Police reform was a key demand of the uprising that toppled Mubarak.
Kerry will stress the need for agreement across the political spectrum on reforms and winning approval in the Shura Council, Egypt's upper house of parliament.
"What they need to do is ... things like increasing tax revenues, reducing energy subsidies, making clear what the approval process will be to the Shura Council for an IMF agreement, that kind of thing," said the official.
Hopes for consensus between the ruling Islamists and opposition parties seem slim. Liberal and leftist opposition parties have announced a boycott of parliamentary elections, scheduled for April to June, over a new constitution produced by an Islamist-dominated assembly and other grievances.
Kerry met opposition leaders on Saturday but many senior figures were missing from the round table talks, including Hamdeen Sabahy, who came a close third in presidential elections last year but had refused to attend the meeting.
However, Kerry met separately with Amr Moussa, a former Arab League Secretary-General and defeated presidential candidate, and spoke on the telephone with another party leader, former U.N. nuclear agency head Mohamed ElBaradei.
Kerry does not wish to be seen as lecturing Egyptians and will not explicitly tell opposition parties to renounce their boycott of the lower house polls, the U.S. official said.
However, he will make the case for them to take part.
"If they want to ensure that their views are taken into account, the only way to do that is to participate," the official said.
(Additional reporting by Marwa Awad, additional writing by David Stamp; Editing by Stephen Powell)
Kerry to stress need for Egypt consensus for IMF deal
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Kerry to stress need for Egypt consensus for IMF deal
