U.S. Secretary of State John Kerry on Sunday rewarded Egypt for President Mohammed Morsi’s pledges of political and economic reforms by releasing $250 million in American aid to support the country’s “future as a democracy.”

Yet Kerry also served notice that the Obama administration will keep close watch on how Morsi, who came to power in June as Egypt’s first freely elected president, honors his commitment and that additional U.S. assistance would depend on it.

“The path to that future has clearly been difficult and much work remains,” Kerry said in a statement after wrapping up two days of meetings in Egypt, a deeply divided country in the wake of the revolution that ousted longtime President Hosni Mubarak.

Egypt is trying to meet conditions to close on a $4.8 billion loan package from the International Monetary Fund. An agreement would unlock more of the $1 billion in U.S. assistance promised by President Barack Obama last year and set to begin flowing with Kerry’s announcement.

“The United States can and wants to do more,” Kerry said. “Reaching an agreement with the IMF will require further effort on the part of the Egyptian government and broad support for reform by all Egyptians. 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.”

Kerry cited Egypt’s “extreme needs” and Morsi’s “assurances that he plans to complete the IMF process” when he told the president that the U.S. would provide $190 million of a long-term $450 million pledge “in a good-faith effort to spur reform and help the Egyptian people at this difficult time.” The release of the rest of the $450 million and the other $550 million tranche of the $1 billion that Obama announced will be tied to successful reforms, officials said.

Separately, the top U.S. diplomat announced $60 million for a new fund for “direct support of key engines of democratic change,” including Egypt’s entrepreneurs and its young people. Kerry held out the prospect of U.S. assistance to this fund climbing to $300 million over time.

Recapping his meetings with political figures, business leaders and representatives of outside groups, Kerry said he heard of their “deep concern about the political course of their country, the need to strengthen human rights protections, justice and the rule of law, and their fundamental anxiety about the economic future of Egypt.”

Those issues came up in “a very candid and constructive manner” during Kerry’s talks with Morsi.

“It is clear that more hard work and compromise will be required to restore unity, political stability and economic health to Egypt,” Kerry said.

Syria and Iran were topics of discussion, according to officials.

With parliamentary elections in April approaching and liberal and secular opponents of Morsi’s Muslim Brotherhood saying they will boycott, Kerry called the vote “a particularly critical step” in Egypt’s democratic transition.

Violent clashes between protesters and security forces have created an environment of insecurity, complicating Egyptian efforts to secure vital international aid.

Officials in the Egyptian presidency said Kerry stressed the need for consensus with the opposition in order to restore confidence in Egypt that it can ride out the crisis. Morsi was reported to have expressed the importance of Egypt’s relationship with United States, which is based on “mutual respect,” and focused on the importance of the democratic process in building a strong and stable nation.

Kerry made clear that in all his meetings, he conveyed the message that Egyptians who rose up and overthrew Mubarak “did not risk their lives to see that opportunity for a brighter future squandered.”

On Saturday, he told the country’s bickering politicians that they must overcome differences to get Egypt’s faltering economy back on track and maintain its leadership role in the volatile Middle East.

The U.S. is deeply concerned that continued instability in Egypt will have broader consequences in a region already rocked by unrest.

U.S. officials said Kerry planned to stress the importance of upholding Egypt’s peace agreement with Israel, cracking down on weapons smuggling to extremists in the Gaza Strip and policing the increasingly lawless Sinai Peninsula while continuing to play a positive role in Syria’s civil war.

The impact of Kerry’s message of unity to the opposition coalition seemingly was blunted when only six of the 11 guests invited by the U.S. Embassy turned up for a Saturday session with him and three of those six said they still intended to boycott the April parliamentary election, according to participants.

Kerry said that the U.S. would not pick sides in Egypt, and he appealed to all sides to come together around human rights, freedom and speech and religious tolerance.

In an apparent nod to the current stalemate in Washington over the U.S. federal budget, Kerry acknowledged after meeting Foreign Minister Kamel Amr that compromise is difficult yet imperative.

“I say with both humility and with a great deal of respect that getting there requires a genuine give-and-take among Egypt’s political leaders and civil society groups just as we are continuing to struggle with that in our own country,” he said. ‘There must be a willingness on all sides to make meaningful compromises on the issues that matter most to all of the Egyptian people.”

The opposition accuses Morsi and the Brotherhood of following in the footsteps of Mubarak, failing to carry out reforms and trying to install a more religiously conservative system.

Morsi’s administration and the Brotherhood say their foes, who have trailed significantly behind Islamists in all elections since the uprising against Mubarak, are running away from the challenge of the ballot box and are trying to overturn democratic gains.

After meeting Morsi and his defense and intelligence chiefs on Sunday, Kerry flew to Riyadh, Saudi Arabia, and planned later stops in the United Arab Emirates and Qatar, where his focus is expected to be the crisis in Syria and Iran.

Kerry is set to return to Washington on Wednesday.

(AP)