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..