Making his first trip abroad, Palestinian Prime Minister Ismail Haniyeh began talks Wednesday with Egyptian officials on a prisoner swap with Israel and the formation of a Palestinian coalition government. Arguments on the two issues have delayed attempts to relaunch the Palestinian-Israeli peace process, in which Egypt is playing a key role as mediator. The Israeli-Palestinian negotiations have a bearing on Wednesday's summit in Jordan, where US President George W. Bush is due to discuss Iraq's escalating conflict with Iraqi Prime Minister Nouri al-Maliki. The United States has been asking Arab states for support in curbing the Iraqi violence, but Arab leaders have urged Washington to make progress on what they see as the Middle East's priority - a settlement of the Palestinian issue. It was the highest level meeting between Egyptian officials and the Hamas-led government since it was formed in March. Haniyeh was not expected to meet Egyptian President Hosni Mubarak during his visit that ends Thursday. "We've made reasonable progress concerning Palestinian dialogue, we've agreed on framework and dialogue continues and we hope that this government will see the light as soon as our internal dialogue is over," Haniyeh told reporters after he met with the Egyptian foreign minister. Egypt's top diplomat, Ahmed Aboul Gheit, expressed optimism following talks. "The general picture today is much better than it was just few days ago," he said. But he was guarded about an early resumption of Palestinian-Israeli negotiations. That "is needed but we can't say it will be soon." Concerning the economic sanctions imposed on the Palestinians since Hamas formed its government following an election landslide in January, Aboul Gheit said "I told him (Haniyeh) that Egypt didn't abide by the embargo in the first place to break it (now), Egypt continued its policy of supporting the Palestinian people." "The most important thing is that there is the Arab political will to break the embargo and Arab nations rejection of the policy of starving the Palestinian people," Haniyeh said. The Palestinian leader, who belongs to the militant Hamas group, arrived in Cairo late Tuesday and held talks with intelligence chief Omar Suleiman, Egypt's point man for the Israeli-Palestinian dispute. Suleiman flew Wednesday to Israel where he held talks with Defense Minister Amir Peretz on the prisoner exchange. He was due to meet Prime Minister Ehud Olmert later Wednesday. Israeli government officials say the two sides are far from a deal. Hamas wants Israel to release, in three stages, 1,400 Palestinian prisoners in return for kidnapped IDF soldier Cpl. Gilad Shalit. Shalit's kidnapping provoked an IDF offensive in Gaza and five months of fighting. On Sunday, Israel and Palestinian factions promised to respect a truce, raising hopes that the peace process could be revived. After his arrival in Egypt, Haniyeh pledged his government would abide by the cease-fire as long as Israel did. "The Palestinian government is committed to the cease-fire agreement, and the stopping of rocket attacks on Israel, on condition that Israel is obliged to stop attacks on the Palestinians," Haniyeh said. After meeting with Arab League chief, Amr Moussa, Haniyeh repeated what Hamas' Damascus-based top leader Khaled Mashaal said here on Saturday, demanding the "establishment of Palestinian state, with June 4, 1967 borders, with East Jerusalem as its capital, and right of return of Palestinian refugees." "The right of return of Palestinian refugees is holy, no Palestinian can make concessions about it," he said. On Thursday, Haniyeh is expected to meet his Egyptian counterpart Ahmed Nazif and then leave Egypt for other Arab countries. He is expected to go to Lebanon, Kuwait, Saudi Arabia, Qatar, Syria and Iran on a tour designed to obtain political and financial support for his government. The trip is Haniyeh's first journey abroad since he took office in March.