EGYPT, SOVIETS TO RENEGOTIATE ARMS DEBT TERMS
Egypt and the Soviet Union are expected
to sign an agreement in Moscow next week settling Cairo's three
billion dlr military debt, Egyptian officials said.
    One official, who asked to remain anonymous, told Reuters a
draft agreement would reduce to zero from two pct future
interest payable on the 10 year-old debt, and set a 25 year
repayment term.
    Talks are due to begin in Moscow on Wednesday.
    Economy Minister Youssri Mustapha, who leaves for Moscow on
Tuesday, met President Hosni Mubarak and Egyptian ambassador to
Moscow Salah Bassiouni to discuss the issue.
    One official said Egypt would propose a new exchange rate
for trade with the Soviet Union. Current commerce is based on a
rate set in the 1960s of 0.38 Egyptian pounds to the dollar
which Moscow sees as unreasonable. The fluctuating official
rate is about 1.36 pounds to the dollar.
    The officials said part of the debt would be paid in
exports of goods such as textiles, leather and furniture.
    Egypt wants to settle the debt problem partly to open the
door for new cooperation, mainly in modernising Soviet-built
steel, aluminium and fertiliser plants under a five-year
development plan ending June 30 1992.
    Egypt, which already imports Soviet coal, wood, newsprint
and glass, also wanted a debt deal to allow purchases of
currently blocked spare parts for its ageing Soviet military
hardware, the officials said.
    An estimated 65 pct of Egypt's arsenal is still made up of
Soviet-supplied equipment, one official said.
    Cairo stopped repaying Moscow for arms purchases in 1977
when then-president Anwar Sadat broke with its long-standing
ally and turned to the U.S..
 REUTER
