The US congress voted for the $300 million addition to the already existing annual US aid to Cairo in 2003.
The aid package was earmarked as compensation for financial losses incurred as a result of the US-led war on Iraq.
Israel, Turkey and Jordan received similar sums, but the money slated for Eqypt was 'delayed' in what Egyptian analysts believe was punishment for the country's strong criticism of the war.
Egyptian President Husni Mubarak cancelled his annual visit to Washington last year to mark his reservations about the US-led invasion of Iraq.
He also voiced strong criticism of what he calls unconditional US support for Israel.
After signing a deal to release the funds on Thursday, US ambassador to Egypt David Welsh said Washington's decision should be considered a reward for Egypt's solid economic performance in 2003 and as encouragement to speed up liberal reforms.
Welsh and Egypt's Minister of State for Foreign Affairs and
International Cooperation, Fayza Abul Naga, also announced that the two countries would soon sign a protocol on US loan guarantees of two billion dollars.
But the United States first wants assurances that Cairo can
repay the money and that it is prepared to speed up privatisation, open its market to foreign investment and lower its customs tariffs.
Egypt, which began liberalising its economy 12 years ago,
received military aid of 1.3 billion dollars and civilian aid of 575
million dollars in 2003, 5% less than Washington handed out in 1998 before adopting the motto "trade not aid".
Welsh on Monday told the American Chamber of Commerce in Egypt that it was vital for the country to put up for sale one of the country's big state-owned banks as soon as possible to signal that it was ready to push ahead with privatisation.
He pointed out that the proceeds of privatisation had dropped from an average $396.8 million a year between 1996 and 2000 to $20.6 million per year during the past three years.
Egypt began liberalising its
economy 12 years ago
Egypt is eager to start negotiating a free-trade agreement with the United States, but Washington believes the Egyptian economy is not ready.
Economic and trade relations between the two countries remain solid, however, despite their political differences.
In 2003, two-way trade came to $3.8 billion, making Cairo Washington's fifth biggest trade partner in the Middle East. The trade balance is in favour of the United States, which exported $2.6 billion worth of goods to Egypt last year.
The drop in the sale of hydrocarbon fuels from $197 million
in 2002 to $179 million in 2003 has been partially
offset by an increase in the sale of textiles and clothing, which are Egypt's biggest export products.
Eighteen US companies are involved in the fuel industry and
their combined investment of $13.5 billion over 30 years comes to nearly a quarter of all US funding poured into the field over that period.
Egypt is the third biggest beneficiary of US investment in the
Middle East, receiving a total of $4.1 billion in annual aid.