WASHINGTON - The Obama administration is close to a deal with Egypt's new government for $1 billion in debt relief, a senior US official said on Monday, as Washington seeks to help Cairo shore up its ailing economy in the aftermath of its pro-democracy uprising.

US diplomats and negotiators for Egypt's new Islamist president Mohamed Morsy - who took office in June after the country's first free elections - were working to finalize an agreement, the official said.

Progress on the aid package, which had languished during Egypt's 18 months of political turmoil, appears to reflect a cautious easing of US suspicions about Morsy and a desire to show economic goodwill to help keep the longstanding US-Egyptian partnership from deteriorating further.

The United States was a close ally of Egypt under ousted autocratic President Hosni Mubarak and gives $1.3 billion in military aid a year to Egypt plus other assistance.

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