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..
  

