Slideshow: Famine strikes East Africa

CAIRO — The United States said on Sunday it would give Egypt $250 million in budget aid after Egyptian President Mohamed Mursi promised to take the painful economic reforms needed to secure an IMF loan.

U.S. Secretary of State John Kerry announced the funding after meeting Mursi and acknowledged Egypt's "extreme needs" as the Islamist government struggles with a slide in currency reserves to worryingly low levels and a soaring budget deficit.

Cairo says it wants to reopen talks with the International Monetary Fund on a $4.8 billion loan which was agreed in principle last November but suspended at Cairo's request due to violent street protests the following month.

"In light of Egypt's extreme needs and President Mursi's assurance that he plans to complete the IMF process, today I advised him the United States will now provide the first $190 million of our pledged $450 million in budget support funds," Kerry said in a statement at the end of a visit to Cairo.

The $190 million is part of a $1 billion pledge by U.S. President Barack Obama in 2011 after Egypt's popular uprising.

Kerry also said the United States would release $60 million for an Egyptian-American Enterprise Fund, which is designed to support small and medium companies in the private sector.

However, the U.S. diplomat hinted further aid will depend on Egypt carrying out both economic and political reforms.

"The United States can and wants to do more," he said. "When Egypt takes the difficult steps to strengthen its economy and build political unity and justice, we will work with our Congress at home on additional support."

A spur to reform
Kerry described the funds as "a good-faith effort to spur reform and help the Egyptian people at this difficult time". On Saturday he said it was "paramount, essential, urgent" that the economy get back on its feet.

However, the sum is dwarfed by the budget deficit, which is growing rapidly as a slide in the Egyptian pound pushes up the cost of subsidizing energy and food, much of which has to be imported using scarce dollars.

In a reform program which Egypt is sending to the IMF, the government targeted a deficit for this financial year of 189.7 billion Egyptian pounds ($28 billion) or 10.9 percent of economic output. Even this assumes economic reforms are made, and the deficit would hit 12.3 percent of GDP without such action, it forecast.

Egypt's political and economic turmoil has frightened away foreign investors and many tourists - a major source of the foreign currency it needs to pay for wheat and fuel imports.

Two years after the fall of Hosni Mubarak, Egypt is deeply split between the ruling Islamists and the leftist and liberal opposition parties, most of which have announced they will boycott parliamentary elections due to start next month.

On Sunday, a Cairo appeals court ordered that a politically fraught retrial of Mubarak, his sons and top aides should begin on April 23, nine days before the elections are due to begin.

Mubarak, the first Arab ruler to be tried by his people after the uprisings that swept the Middle East and North Africa, was jailed for life for ordering the killing of demonstrators in 2011, but was granted a retrial by a Cairo court in January.

Jacquelyn Martin / Pool via Reuters

U.S. Secretary of State John Kerry (L) shakes hands with Egypt's President Mohamed Mursi at the Presidential Palace in Cairo March 3, 2013.

As Kerry completed his visit, protesters and security forces clashed in Cairo's Tahrir Square, center of the revolution, as police tried to clear demonstrators and open the square to traffic, a witness said.

Unidentified assailants set fire to a police vehicle outside the nearby Egyptian Museum, where the treasures of Ancient Egypt are on display, the state news agency MENA reported.

Hundreds of people were also injured in the Suez Canal city of Port Said during clashes between police and protesters there, security and medical sources said.

Egypt's armed forces said on its Facebook page one military officer was wounded when he was shot in the leg and one soldier from the security forces was killed when he was shot in the neck by "unknown elements".

April IMF deal?
Finance Minister Al-Mursi Al-Sayed Hegazy was optimistic that an IMF agreement could be sealed before the four-stage lower house poll gets under way on April 22. "I expect and am hopeful this deal can be made before the elections," he told reporters.

Economists are divided between those who see such a timetable as over-optimistic and those that believe Egypt cannot hold out much longer without help.

Foreign currency reserves tumbled to $13.6 billion in January from $36 billion before the fall of Mubarak, and the Egyptian pound has dropped 8.2 percent since the central bank began auctioning dollars at the end of December.

Reserve figures due out this week are expected to show a continuing slide further below $15 billion - the amount needed to fund three months' imports, economists said.

However, the price of any deal is likely to be high. Egypt is sending projections to the IMF of huge increases in gasoline and diesel prices as it comes under pressure to curb soaring energy subsidies, a cabinet official said on Sunday.

The government plans to continue subsidized fuel prices for the most needy, under a rationing system to be implemented in July. However, Egyptians excluded from this scheme would face a jump in prices that could provoke public fury if implemented.

The official, who is part of the cabinet's economic team, told Reuters the increases would be put to an IMF team once it arrives in Cairo to negotiate the loan. "The new prices are included in the economic reform program that will be presented to the IMF mission," said the official, who requested anonymity.

Petroleum Minister Osama Kamal was quoted by the state news agency MENA as describing the figures as estimates and said that no decisions had yet been made. According to the projections, the commonly used 90 octane gasoline would leap to 5.71 Egyptian pounds ($0.85) a liter from 1.75, while diesel would go up to 5.21 pounds from 1.10.

PORT-AU-PRINCE, Haiti -- For the past three years Hugh Locke has been conducting an unusual experiment in Haiti, creating a new development model for a people who have known profound hardships for many years – and who are facing a headwind of more misery this year.

Experts believe Haiti is likely to experience a severe food shortage in 2013 -- beginning as soon as April -- though hunger is less likely to affect those who have participated in Locke’s experiment.   

Locke has about 30 years of experience in the developing world, where he used many of the same methods established by the foreign aid community.

Today he is strongly critical of the way most foreign aid is spent in developing countries, including Haiti.

"Imagine for a moment that the current rules of foreign aid were applied to the Hurricane Sandy recovery efforts in New York, New Jersey and Connecticut," Locke wrote in a February blog post.

"In this 'foreign aid scenario,' overseas governments would step forward to provide the $50 billion in aid instead of the U.S. Congress.

Those foreign governments would each decide how their money was to be spent, and the U.S. and state governments would not be consulted.

Each government would bring in its own contractors and its own charitable organizations to implement the recovery efforts, with almost no money going to local groups or contractors. And when the funding stopped, all activities on the ground would stop and the resulting projects would collapse.

With few exceptions, this is how foreign aid is given out by wealthy countries to poor countries the world over. Is it any wonder that it is not having the intended impact?"

Locke -- a Canadian whose background is in forestry -- had an epiphany while embarking on a new tree-planting effort in Haiti.

An enormous part of Haiti’s energy comes from trees that are turned into charcoal. The charcoal is used not just for domestic cooking but also in industry. Who knew that a dry cleaner could be powered by charcoal? Over decades, Haiti’s countryside has been stripped of most of its trees; and with them, vital protection for agricultural topsoil has also been stripped. The nutrient-rich topsoil -- on which crops grow -- has been washed away in floods and storms, crippling the nation’s fragile agricultural production. More recently, it has also been further devastated by weather systems such as Superstorm Sandy.

To stop this topsoil erosion and to help give Haiti’s farmers a chance to produce abundant crops, Locke wanted Haitians to plant trees. But he wasn't sure how he was going to persuade farmers struggling to grow crops to get involved in a forestry project. What would be their incentive? And how would he satisfy his sponsor -- Timberland’s Jeff Swartz – who insisted Locke create a business model that would continue to function after Timberland’s project funding stopped? What Swartz was asking went against most of the established development tenets.

Locke explains that the current practice in foreign aid is to give out money for short-term projects with measurable results, even if a longer program can be shown to build local capacity. "Giving out fish is preferable to teaching people how to fish," he wrote.

"At the same time, there is a rule in foreign aid that those with the money, whether governments or non-profit organizations, can deliver any given service more effectively and efficiently than the local people being helped. The problem is that both of these approaches tend to create a dependency on handouts, and this is particularly true in Haiti."

Helping Haitians help themselves
In a state of conflict and some confusion, Locke came up with a radical idea that would become an ingenious experiment.

Locke calls his model exit strategy aid – and, in Haiti at least, it is a radical departure from classic development paradigms fusing ideas derived from established aid models with hard-nosed business practices.

We recently traveled to Haiti to see Locke’s experiment underway. We left Port-au-Prince early in the morning, but not early enough to avoid the Haitian capital’s gridlock, which seemed a fitting metaphor for a country that doesn’t seem able to move forward, no matter how much traffic there is on its roads.

Leaving the city we soon encountered a surprising smooth asphalt road – which, we remarked, was better than many of the roads in the United States. The road, it turned out, had been constructed by a foreign contractor and was paid for by foreign aid. While it seemed to be a noble effort, it troubles Locke, who said:       

“A road that is built by donor money using foreign contractors is never going to be fully a part of the national transportation system. So it will not be maintained. It will always be absolutely dependent on foreign funding on every aspect of its creation and its maintenance forever.”

Locke wanted to break that pattern and encourage Haitians to help themselves.

After two and a half hours driving north, past the fertile soils of the Artibonite Valley, we saw an aid project three years in the making.

In early 2010 Locke and his Haitian partner Timote Georges struck a deal with 2000 small-scale farmers near Gonaives in the north of Haiti: if they formed a cooperative and made a commitment to plant trees, Locke would give them robust seeds for their crops as well as farming tools and training.

Not only would the farmers benefit from improved crops, his theory went, but the cooperative to which they belonged would also be able to sell the trees at a profit – a profit that would be shared. Right at the beginning, Locke decided funding for the project would stop in early 2013, giving the farmers a precise target to hit. The “agro-forestry” project had to be successful by then because at that time Locke would walk away.

It was an audacious plan but is it working? Locke is tracking the progress of the exit strategy aid project on his website.

Locke’s effort in Haiti coincides with a new outside recognition that foreign aid practices in Haiti must change. It is a sentiment echoed by one of the most prominent and knowledgeable figures in Haiti's aid landscape, Paul Farmer, who co-founded Partners In Health, and who has worked in Haiti for three decades.

“If I had been asked 30 years ago, when I first started coming to Haiti, how best to direct international aid to address disease and poverty, my answer would not have been what it is today," Farmer wrote in a recent UN report. "Working in partnership with non-governmental organizations felt right in the early 80s, the third decade of a dictatorship."

"My belief now is that the only way to create durable and transformative change—to break the cycle of disease and poverty affecting the lives of millions of Haitians—is through direct investment in and accompaniment of national and local institutions that confer basic rights.”

Pablo Martinez Monsivais / AP

U.S. President Barack Obama, left, and then Russian President Dmitry Medvedev pictured at a bilateral nuclear security meeting in Seoul, in March. Medvedev is now Russia's prime minister.

Russia accused the United States on Wednesday of using its aid mission in Moscow to try to influence Russian politics and the outcome of elections, a day after Washington announced Moscow had ordered the mission's closure.

The U.S. Agency for International Development, or USAID, has spent more than $2.7 billion in the two decades since the fall of the Soviet Union, State Department spokeswoman Victoria Nuland told reporters Tuesday as she announced the closure, adding that it had planned to spend $50 million this year.

In a statement Wednesday, Russia’s Foreign Ministry said Moscow had serious questions over the operations of the U.S. Agency for International Development (USAID) in Russia's regions, especially in the North Caucasus where Russia is fighting a persistent Islamist insurgency.

"It's about attempts to influence political processes, including elections of various types, and institutions of civil society though the distribution of grants," the statement said, according to Reuters.

On Tuesday, Nuland said that while USAID would leave Russia “we remain committed to supporting democracy, human rights, and the development of a more robust civil society in Russia, and we look forward to continuing our close cooperation with Russian non-governmental organizations.”

She added that USAID had worked over the years with the Russian government to “fight AIDS there, fight tuberculosis, help orphans, help the disabled, combat trafficking, support Russian programs in the environmental area, wildlife protection.”

“So it is our hope that Russia will now, itself, assume full responsibility and take forward all of this work that we were proud to do together so that the Russian people continue to have the benefit,” she said.

'Rich enough'?
Asked if the Russian government had expressed “specific points of dissatisfaction with USAID’s work” or had simply said “We’re rich enough, we don’t need it?”, Nuland said she would let the Russians “characterize their motivations.” But she added that “I would say it tends to trend toward the latter, their sense that they don’t need this anymore.”

Russia police investigate democracy protest by toys

USAID's ordered departure comes amid a broader crackdown on Russian civil society groups after fraud-tainted parliamentary election last year prompted massive anti-government protests.

President Vladimir Putin blamed Washington for trying to destabilize Russia and accused Secretary of State Hillary Rodham Clinton for signaling the start of demonstrations.

Thousands of democracy campaigners protest in Russia

Steven Pifer, a former U.S. ambassador to Ukraine who is now at the Brookings Institution think tank, told Reuters that he believed the decision on USAID reflected some reluctance by the Russian government to see foreign support for pro-democracy efforts in the country.

"They see AID's efforts in Russia as being a prime funder of the NGOs that are concerned about their elections and concerned about the regression of democracy in Russia," Pifer said.

He said the Russian government may also be "trying to make it more difficult" for the outside world to support pro-democracy NGOs in Russia.

Russia a 'great power'
Matthew Rojansky, of the Carnegie Endowment for International Peace, told Reuters that Russian authorities "have made clear for the better part of a decade that they see Russia as a great power and a provider of assistance, not a recipient." 

"Add to that tension over the pre- and post-election protests, which the Kremlin alleges were orchestrated by U.S.-funded NGOs (non-governmental organizations), plus the deep disagreement over U.S. democracy-promotion activities in the Middle East, and you can see why Russia may have taken this decision now," he added.

Russian court sentences Pussy Riot rockers to 2 years in prison

NGOs receiving foreign funding and engaging in political activity must now register as "foreign agents," which is likely to undermine their credibility among Russians.

Another law sharply increases the punishment for taking part in an unauthorized protest rallies. State television has denounced the country's only independent election-monitoring body, Golos.

Grigory Melkonyants, the deputy director of Golos, which gets most of its funding from the U.S., said closing the USAID office "is an unfriendly move toward the U.S.”

Russia PM Medvedev: Pussy Riot members should be freed

He criticized the Kremlin's "paranoia and nervousness" and "inability to understand the reasons behind serious public discontent. They are looking elsewhere for culprits and think it's rooted in the American funding."

"The Russian government's decision to end all USAID activities in the country is an insult to the United States and a finger in the eye of the Obama Administration," Senator John McCain, an Arizona Republican, said in a statement.

"There should be no confusion as to why this decision was made: an increasingly autocratic government in Russia wants to limit the ability of its own citizens to freely and willingly work with American partners on the promotion of human rights, democracy, and the rule of law in Russia," he added.

NBC News' Ian Johnston and Reuters contributed to this report.

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