WASHINGTON—President Barack Obama will announce this week a new aid plan for the Middle East and North Africa that U.S. officials say will be far bolder than previous American economic assistance to the region.
Mr. Obama will outline the plan, which could include debt cancellation and a reprogramming of financial aid the U.S. already provides to countries like Egypt, in a speech he is scheduled to deliver Thursday at the State Department.
European Pressphoto Agency
Whatever aid he announces, though, is unlikely to assuage Arab governments, which had been hoping the White House would push forcibly for a resumption of Palestinian-Israeli peace talks. The president’s aides say his speech will focus only briefly on the issue.
“At the end of the day, the Palestinian cause remains a dominant issue,” said a senior Arab official. “A speech by the president without addressing the conflict is unlikely to generate much enthusiasm.”
Mr. Obama met Tuesday with King Abdullah II of Jordan, who has been pressing U.S. officials to take a more aggressive role in the peace process, according to Arab diplomats.
After the meeting, Mr. Obama said the U.S. will provide Jordan with hundreds of millions of dollars through the Overseas Private Investment Corporation, the government institution that finances and insures private business to promote economic growth. The result, according to the U.S., will be roughly $1 billion for economic activity in Jordan. The president also pledged 50,000 metric tons of wheat.
“All of this will help to stabilize the cost of living and day-to-day situation of Jordanians and will provide a foundation so that these economic reforms can move forward and long-term development can take place,” Mr. Obama said.
The president’s goal, officials said, is to give a financial boost to the political change sweeping the Mideast and North Africa, where dashed economic aspirations have fed unrest.
Senior U.S. officials are particularly alarmed by the deterioration in Cairo’s finances since the street revolt that ousted President Hosni Mubarak in February. The Egyptian government has been forced to spend between $3 billion and $3.5 billion of its foreign-exchange reserves a month to pay for food and other commodities as tourism has plunged and overseas remittances have dried up.
Egypt’s government has been seeking relief on around $1 billion in debts tied to wheat purchases in the 1970s, according to officials involved in the talks. Cairo has paid off the principal on these loans, but continues to service interest payments.
The administration is looking at a mixture of direct aid, debt relief, and export credits to help stabilize Egypt’s finances. “There are a whole range of tools we could use,” said a U.S. official. “We’ve been looking for the right mix.”
Mr. Obama’s speech will come ahead of action on economic and trade initiatives that the Group of Eight economic powers are poised to take during their summit in France next week. Leaders are working on a short-term stabilization package, particularly for Egypt and Tunisia, that would involve international financial institutions and perhaps some of the Persian Gulf states, according to a G-8 diplomat.
The diplomat said G-8 member countries may also change trade policies to help boost regional exports to Europe and the U.S., perhaps using the European Bank for Reconstruction and Development, which was set up after the Cold War to help former East Bloc nations.
Mr. Obama may struggle to win over skeptics in Congress. The U.S. already provides Egypt with roughly $1.3 billion a year, and lawmakers are pushing the White House for deep spending cuts.
Additionally, a number of lawmakers have raised concerns in recent weeks about Egypt’s post-Mubarak foreign policy, particularly its warming relations with Iran and militant Palestinian group Hamas, which the U.S. and the European Union designate as a terrorist entity.
Mr. Obama’s speech comes a day before the president is set to meet with Israeli Prime Minister Benjamin Netanyahu in Washington. After meeting with King Abdullah, Mr. Obama said “it’s more vital than ever that both Israelis and Palestinians find a way to get back to the table.”
In the speech, Mr. Obama will seek to connect the death of Osama bin Laden with the popular uprisings across the Middle East and North Africa.
“The Arab Spring represents a real and organic repudiation of the things bin Laden stood for in the region and among the people he claimed to represent,” a senior administration official said Tuesday, previewing one of the speech’s themes.
There will be no new policy on the Mideast peace process in the speech, but Mr. Obama is likely to address the union of the Palestinian Fatah and Hamas factions, the official said, and to say Hamas must reject terrorism and recognize Israel’s right to exist if it wants to be part of the Palestinian government.
The president is also expected to refer to the pending effort to have the United Nations recognize a Palestinian state. He plans to restate U.S. policy that the conflict should be settled through negotiations, not by a declaration.
—Laura Meckler contributed to this article.Write to Jay Solomon at email@example.com