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.

Khaled Desouki / AFP - Getty Images

Egyptian election officials count ballots at a polling station in Cairo on Thursday after polls closed in the country's landmark presidential vote.

ANALYSIS

CAIRO - Hundreds of thousands of people throng the streets. The crowds furiously demand an end to nepotism and corruption and all the unemployment and injustice they create. The protesters rally behind a slogan that is also a deeply held conviction: Islam will make things better. Islam will bring justice.

That was Iran in 1979. The revolution was popular at the time. We all know how well it turned out. Iranian’s Islamic revolutionaries became ever more zealous and bellicose. They stormed the American Embassy in Tehran and held 66 Americans hostage for over a year. Iran has been a pariah ever since.

An Iranian friend told me today that when older Iranians in Tehran watch what’s happening in Egypt now, they say, “It looks like what we went through. The same thing is happening.”

In Egypt, the Muslim Brotherhood, banned for 80 years, appears to be in the lead in the country’s first ever free election. The group has staged mass rallies. The group’s slogan is "Islam is the solution." If the Muslim Brotherhood takes over Egypt, the changes could be as profound for this country and the region as they were for Iran.

This is where things stand now. On May 23-24, Egyptians voted. There were more than a dozen candidates, among them five with the potential of winning.

As of a preliminary, still-unofficial counting, it appears there will be a runoff election between the two top contenders of the first vote. The runoff will take place June 16-17. The two candidates couldn’t be more different: former President Hosni Mubarak’s last prime minister, Ahmed Shafiq, and the Muslim Brotherhood’s candidate, Mohammed Mursi. Whoever wins will take the country down one of two very different paths.

Ahmed Shafiq

Ahmed Shafiq is promising to be a strongman. Critics call him a fascist. An Egyptian tonight told me he worried Shafiq will become another pharaoh. Shafiq is the antithesis of the Muslim Brotherhood. Shafiq has promised to restore law and order to Egypt within 24 hours of his election. He’s said that he’d crush any new protests if they are illegal, and that he wouldn’t hesitate to send in soldiers and police. He still openly expresses his admiration for Mubarak. On his campaign posters around Cairo, Shafiq’s slogan reads: "Actions, Not Words." Shafiq is not the man the revolutionaries who went to Tahrir Square more than a year ago had in mind when they demanded democracy. In fact, the revolutionaries –- especially the Facebook and Twitter generation -- hate Shafiq. But those revolutionaries aren’t setting the political agenda here anymore.

Mohammed Mursi

Mohammed Mursi is the Muslim Brotherhood’s man and has promised to purge Egypt of the old regime if he wins. After casting his ballot, Mursi told local television that he won’t allow “ANY members of the former criminal and corrupt regime to keep their jobs.” He stressed the word "any," shouting it and waving a finger. It’s a message directed at Shafiq and the Egyptian military. If Mursi has his way, Shafiq will be removed, maybe even put in jail; so will all the old cronies. That appeals to many Egyptians. A lot of Mubarak’s cronies are still hanging around in bogus jobs the former president created to appease and enrich his inner circle. The threat of a purge is also a warning to the military that it won’t be able to stage a coup against the Brotherhood, which is a distinct possibility.

This could go a couple of ways. Neither looks promising.

Egypt's next president to be an Islamist or Mubarak's former premier?

Amr Abdallah Dalsh / Reuters

Former prime minister and presidential candidate Ahmed Shafiq talks during a news conference in Cairo on May 14.

A Shafiq victory

If Shafiq wins, the Brotherhood will go berserk. It will claim fraud. It will protest. It will take to the streets. The old revolutionaries, the ones who didn’t want the Brotherhood or Shafiq, will go to the streets and try to re-occupy Tahrir Square. They’ll call for a new revolution, a do-over, hoping to get new candidates and new elections. Shafiq will crush the demonstrations. It will be violent. There will be deaths.

Shafiq won’t hesitate to use force. He’s already openly said he’ll smash dissent, and he’ll have a mandate from voters. How will the United States react? Will there be real condemnations? Egyptian revolutionaries, the sympathetic-looking, educated ones who speak English, will complain that they have a new dictator worse than Mubarak. Islamic cells will go underground, potentially carrying out bombings and other attacks that will delegitimize the “democratic revolutionaries.” But can Shafiq really win and restore order? Or will the revolutionaries and the Brotherhood be successful with another Tahrir revolution? If Shafiq wins, will Egyptians have defeated themselves by electing a man who is against the revolution they fought for? Egyptians will effectively have used their votes to elect someone many fear will be a strongman like Mubarak. Many Egyptians will believe the democratic revolution will have failed if Shafiq is the new president.

Asmaa Waguih / Reuters

Presidential candidate Mohammed Mursi arrives at a polling station to cast his vote in Al-Sharqya, northeast of Cairo, on Wednesday.

A Mursi victory

If Mursi and the Brotherhood win, the army will go on the defensive. Senior officers will fight against being purged from their jobs. If the Muslim Brotherhood wins, Egyptian women and Christians will suffer.

The Muslim Brotherhood is at its heart a salafist group, a purist fundamentalist movement focused on imposing Islamic laws and morals. In the current political discourse, there has been a distinction drawn between salafists and the Muslim Brotherhood. The difference isn’t as wide as it seems. Salafists are fundamentalists who dedicate their lives to religious preaching, converting non-believers and defending the strict moral codes of Islamic law. Salafists are generally poor, sometimes impoverished, choosing the purity of poverty over the temptation and ungodliness of wealth. Salafists spend many nights sleeping on hard mosque floors. They generally do not organize politically. They are like medieval Christian hermits, dedicated solely to the path of God. The Brotherhood started out as a salafist movement. The group’s founder, Hassan al-Banna, began his career by writing letters, some of them threatening, warning fellow Egyptians to give up immoral practices.

But the Brotherhood, unlike the ascetic salafists, embraces politics and does it well. The Brotherhood is practical. It has wealthy donors. The Brotherhood believes the best way to implement Islamic law is to win power by gradually taking control of state institutions.

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If Mursi becomes president, it will be disastrous for Egyptian women. Some will pay in blood. Female circumcision –- also known as female genital mutilation –- has long been practiced in Egypt. The process involves cutting out part, or all, of a girl’s clitoris when she starts to show signs of sexual maturity. In the 1990s as many as 97 percent of young Egyptian women underwent the practice. Female genital mutilation, or FGM, is most often carried out by barbers or midwives using a straight razor, or even more commonly, with the snip of scissors. Unlike male circumcision, FGM isn’t primarily used to demarcate community affiliation or for its purported health benefits. FGM is about control. In popular Egyptian and regional culture, women are seen as weak, easy victims to temptation in the same way Eve couldn’t resist that shiny apple in the Garden of Eden. FGM follows the same principle. The clitoris, as a center of sexual pleasure, is seen here as a source of temptation. If a woman rides a donkey, which many rural woman do, or bathes, her clitoris might be stimulated. Like Eve, she’d lose control of herself and make bad decisions. Society would collapse. Paradise lost. Therefore for everyone’s good, including her own, the woman’s clitoris is snipped out.  The practice was banned under Mubarak. His wife was a major advocate of the ban, which had a major impact. FGM still takes place in Egypt but no longer in public hospitals. FGM percentages dropped over a third after the 2008 ban. As part of its election campaign, the Brotherhood said it wants to reverse the ban on FGM. It also wants to lower the legal marriage age for women to 14 and make it much more difficult for a woman to divorce her husband or keep custody of her children.

Many Christians fear their future won’t be much brighter than women’s under the Brotherhood. Although the Brotherhood has gone to great lengths to say it will not persecute Christians, few believe it. Christians worry they’ll be forced to pay a tax called jiziya, an ancient form of Islamic protection money that Christians paid to Islamic rulers in exchange for safety and community rights. Several Christians have told me they will leave Egypt if the Brotherhood wins. Others say they will stay and fight. Egypt has a large Christian community –- 10 million to 12 million members now –- which has had a presence in this country since the Roman Empire.

Possible coup?

If the Brotherhood wins, the Egyptian army will probably consider a coup. A coup would go against every democratic principle that Egyptians fought to achieve in last year’s revolution, but, then again, so would electing Shafiq. A coup would be condemned internationally, but many foreign governments might secretly welcome it. The possibility of a coup could explain why Mursi went to such lengths to say he’d purge the entire Egyptian power structure if elected. Omar Suliman, President Mubarak’s old intelligence chief, who knows a thing or two about the military’s thinking, said he expects there would be a coup if the Brotherhood wins power. A coup, if it happens at all, might not take place right away. The military might wait until the Brotherhood alienates moderate Egyptians, so that they’d welcome a military intervention. The longer the military waits, however, the harder it will be to carry out a coup, because the army won’t be able to fight off purges from a democratically elected government forever.

In Egypt's election, politics is a new family affair

Constitutional battle

The military does, however, have one trump card. There is currently no Egyptian constitution. It was dismantled during the revolution against Mubarak and still has to be rewritten. Without a constitution, the new president’s powers will be unclear. If the Brotherhood wins, its supporters –- who now have the overwhelming majority in parliament -- will try to write and pass a new constitution as soon as possible. Control over the constitutional process will become critically important in the coming months.

In the end there are two very distinct scenarios. If Shafiq wins, there will be protests, which he will try to suppress. There will be violence. Where the violence goes is hard to predict. If Mursi wins, the Brotherhood will gradually impose Islamic law, try to fight off a military coup by purging the military and quickly write a constitution. Women and Christians will suffer.

Either way, the next few months in this country are critical, with as much at stake for Egypt as there was for Iran in 1979. Change is coming, but it remains unclear which way Egypt and the Middle East will go.

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AFP - Getty Images

Egyptian election officials count ballot papers at a polling station in Alexandria after polls closed Thursday.

Egypt's first free presidential election could be heading for a contest between an Islamist candidate and a former air force chief who was a leading member of ousted leader Hosni Mubarak's last government.

According to results from 25 out of 27 areas – put together by the Ahram Online news organization – Muslim Brotherhood candidate Mohamed Mursi was ahead with 26.48 percent of the vote, while Mubarak's former prime minister, Ahmed Shafiq, was just behind at 24.74 percent.

Leftist Hamdeen Sabahy was in third, according to Ahram's figures, at 20.01 percent. They and the other candidates are vying for two places in a final run-off election on June 16 and 17.

Runoff may offer Egypt's voters two stark paths

Official results are not expected until Tuesday. 

'I'm in shock'
Young Egyptian revolutionaries who helped topple Mubarak now face what they see as a dispiriting choice between a conservative Islamist and a hardline member of the old guard. 

"To choose between Shafiq or Mursi is like being asked do you want to commit suicide by being set on fire or jump in a shark tank," Adel Abdel Ghafar wrote on Twitter.

In Egypt's elections, politics is a new family affair

Tareq Farouq, 34, a Cairo driver, told Reuters he was in shock. "How could this happen? The people don't want Mursi or Shafiq. We're sick of both. They are driving people back to Tahrir Square," he said, referring to the home of the long-running protest camp.

This week's first-round vote has polarized Egyptians between those determined to avoid handing the presidency back to a man from Mubarak's era and those fearing an Islamist monopoly of ruling institutions.

'We want to live ... like human beings': Egyptians vote

The election marks a crucial step in a messy and often bloody transition to democracy, overseen by a military council that has pledged to hand power to a new president by July 1. 

The second round threatens further turbulence. Opponents of Shafiq, Mubarak's last prime minister, have vowed to take to the streets if he is elected, Reuters reported. But to supporters, Shafiq's military background offers reassurance that he can restore security, a major demand of the population 15 months after Mubarak's ouster. 

Israel nervous
Many Christians, who form about a tenth of Egypt's 82 million people, complained of discrimination in Mubarak's day, but were likely to have voted for Shafiq in preference to an Islamist. 

A victory for Mursi, Reuters said, could worsen tensions between resurgent Islamists and the powerful army, which sees itself as the guardian of the state. 

Egypt's elections: A struggle between secularism and political Islam

If Mursi becomes president, Islamists will control most ruling institutions – but not the military – in Egypt, the most populous Arab nation, consolidating electoral gains made by fellow-Islamists in other Arab countries in the past year. 

"Now Egyptians will have to choose between the revolution and the counter-revolution. The next vote will be equivalent to holding a referendum on the revolution," Mohamed Beltagy, a leader of the Muslim Brotherhood's party, told Reuters. 

Israel has nervously watched the Islamist rise, especially in Egypt, its old enemy until a 1979 peace treaty. Mursi vaguely advocates a "review" of the pact, but the Brotherhood says it will not tear it up. Shafiq has vowed to uphold it. 

The Brotherhood announced early on Friday that the run-off would be between Shafiq and Mursi after almost all votes were counted, Reuters said.

A member of Shafiq's campaign also said Mursi and Shafiq were in the lead, but that counting was not complete, Reuters reported. Aides to other candidates consistently put Mursi ahead but gave shifting tallies for second place through the night. 

Reuters contributed to this report.

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