The Ismail government has signed off on an EGP 46 bn social security package for FY2017-18, according to a statement from the Finance Ministry. The package includes a 15% increase in pensions at a cost to the state of EGP 20 bn in a bid to cushion pensioners from the worst of record-high inflation, Social Solidarity Minister Ghada Wali told Al Masry Al Youm. Cash transfers from the Takaful and Karama programs will increase by about EGP 100 per household as the government earmarked an extra EGP 2.25 bn for them, she added. Finance Minister Amr El Garhy says the government will also disburse two bonuses to state employees who are subject to the Civil Service Act, while state employees not regulated by it will get one bonus payment.

The Ismail cabinet also approved raising the minimum income tax threshold to EGP 7,200 a year from EGP 6,500, Vice Minister of Finance Amr El Monayer told a news conference on Monday, according to Reuters and AMAY. That means individuals earning less than 7,200 a year (or half the minimum wage) will not be subject to income tax.

The state will also provide tax breaks to citizens, with the size of break falling the higher up the income ladder you are. Those making between the minimum threshold of EGP 7,200 and EGP 30,000 will see their taxes discounted by 80%. Those making EGP 30,000-45,000 will receive a 40% break, while those making up to EGP 250K will be getting 5% off their tax bills, said El Monayer.

The increased spending was taken into consideration when drafting the FY2017-18 budget, said Vice Minister of Finance Ahmed Kouchouk, who added that the government is still projecting a deficit of 9% of GDP during the year, Bloomberg reports. Some elements of the package will remain outside the budget and will require separate legislation, El Garhy noted, saying these have to do with tax benefits, according to Al Borsa. Bloomberg, meanwhile, says “the package, excluding the cash subsidy raise, requires parliament approval.”

The story is getting widespread pickup outside of Egypt thanks to coverage by Reuters and Bloomberg (above) and a take by the Associated Press.

Uh, how much, exactly, is the package worth? The release from the Finance Ministry puts it at EGP 46 bn. They’re the folks who foot the bill, so we’re going with them. But Bloomberg is reporting EGP 45 bn, Reuters is saying EGP 43 and we’ve seen EGP 43 in some domestic press outlets.

House approves capital markets stamp tax and a law criminalizing cheating: The House of Representatives approved changes to the income tax law in a plenary session vote on Monday that will impose a 0.125% stamp tax on the buy- and sell-sides of capital markets transactions, Al Borsa says. The duty, which replaces the suspended capital gains tax, will rise in steps to 0.175% by its third year in effect. The measure still needs to be ratified by the presidency and published in the Official Gazette before it comes into effect, probably within days, as Vice Minister of Finance Amr El Monayer had previously said that tax would be enforced in late May or early June.

The House also voted to approve a bill that sets strict punishments and high fines for cheating on high school exams,Ahram Gate says. The law will see teachers and administrators found to have leaked exams face from 2-7 years in prison and pay fines of EGP 100-200k, while students caught cheating will face a year in prison and fines of EGP 5-10k.

EFSA’s new regulations for investment in securities brokerages have gone into effect: The Egyptian Financial Supervisory Authority (EFSA)’s new regulations on investments in brokerage firms were published in the Official Gazette on Monday, Al Shorouk reports. The new rules, which were issued in early May, make it mandatory for the EFSA to approve transactions through which any individual or entity would acquire stakes of 10%, 25%, 33%, 50%, 66%, or 100% in a licensed brokerage. EFSA is presenting the change as being part of its drive to tighten capital market regulation and improve overall transparency.

State coffers to get a slice of slush funds: The Ismail cabinet signed off on a new law proposal on Monday that would see the government earmark a percentage of what are known as “special revenue funds” or “special accounts” for state coffers to help narrow the budget deficit, Al Borsa reports. The percentage deducted from the semi-official slush funds would be determined according to the value and size of the accounts managed by each ministry, which would be categorized into three tiers. The law will exclude research funds, funds from international donors (including both loans and grants), university hospital accounts, as well as social welfare, housing, and healthcare funds, the newspaper adds.

House Representatives have been pressing the government to draft legislation to govern slush funds — which are financed with revenues that are separate from the normal budget process and can reportedly be spent on a minister’s authority with little oversight — and potentially allocate around 80% of them to state coffers. The government’s decision comes a little over a week after the Finance Ministry said it would be working with the prime minister’s office to have ministries and government agencies compile reports on the funds under their control to present to the House for review.

President Abdel Fattah El Sisi signed the new NGO bill into law yesterday, Al Shorouk reports. The bill, which was approved by the House of Representatives back in November, is already out on the Official Gazette. The law will regulate the work of some 46k non-governmental organizations, which have one year to comply or face jail terms of up to five years. As before, the law gives the state the power to decide who can set up an NGO and for what purpose. It also stipulates that donations of more than EGP 10k “must be preapproved. If no approval is granted within 60 days the request is automatically denied,” Reuters reports. The law would also give a new regulatory body the authority to govern field work and to ensure that an NGOs work is supportive of the state’s “plans, development goals and priorities.” The story is getting widespread attention in the international press, with the Associated Press and the New York Times also running takes on the issue.

Look for this issue and others like it to be framed in context of next year’s presidential election. From the NYT’s lede: “strict new regulations on aid groups stok[e] fears that his government intends to accelerate its harsh crackdown on human rights activists before a presidential election scheduled for next year.”

Egypt’s trade deficit fell 48% y-o-y in 4M2017 to USD 8.5 bn, Trade and Industry Minister Tarek Kabil said, Al Masry Al Youm reports. Non-oil exports rose 14% y-o-y to USD 7.4 bn and there was a 30% y-o-y decrease in imports to USD 15.9 bn. The ministry singled out growth in exports of construction materials, agricultural products, readymade garments, and food products, according to Al Borsa. The bulk of the exports went to COMESA, Agadir, GCC, and EU countries. Standouts included Turkey and the United States, the ministry said.

Arafa Holding plans to expand sales to the US, supported by the drop in the EGP’s value, Ahmed Feteha and Tamim Elyan write for Bloomberg. Chairman Alaa Arafa says the American market was out of reach for his company prior to the flotation as the “currency was overvalued.” Arafa says “since the beginning of 2017, we have started rebuilding export markets lost in previous years … Before that we were thinking when will our business shut down; but now there is hope; now we can sit with clients and speak about the future.” The company is looking to expand its production to 6,500 suits per day in 2H2017, from 5,800 currently. Arafa says his company is also looking to introduce its Concrete brand in outlets in GCC countries by 2019. In Egypt, the company will introduce one of the brands it owns in the UK as part of a plan to aggressively target the middle income segments, he says. Read Armani's Egyptian Supplier Mulls U.S. Foray on Weaker EGP.

INVESTMENT WATCH- India’s TCI Sanmar Chemicals has plans to increase as much as USD 300 mn in Egypt, bringing its total invested here to USD 1.5 bn, Chairman PS Jayaraman told Investment Minister Sahar Nasr, according to Al Masry Al Youm. The company says it wants to increase its caustic soda production lines by investing USD 300 mn in doubling its PVC production output to 400,000 tonnes as well as including a new plant to manufacture 135,000 tonnes of calcium chloride. Separately, Nasr met with the Finnish ambassador to Egypt to discuss that country’s investments in renewable energy and electricity, Al Shorouk reports.

Dana Gas’ board of directors has approved carrying out limited drilling activitiesin Egypt. “In light of the recent collections received from the Egyptian government the board considered and approved that additional limited drilling activities should be carried out,” the company said in a bourse statement picked up Gulf News. Egypt made payments last week covering 25% of the arrears owed to Dana Gas in 1Q17. The company says it is owed USD 275 mn as of the end of 1Q17.

Supreme Media Council to discuss website ban today: The newly-founded Supreme Media Council will meet today to discuss the Ismail government’s decision last week to block access to 21 news websites for allegedly publishing fake news and hosting pro-terrorism content,Al Mal reports. The decision, which restricted access to news websites including Mada Masr, Huffington Post Arabic, Qatar’s Al Jazeera, as well as Al Borsa and Daily News Egypt, is “standard procedure” when sites pose a threat to national security, council member Nadia Mabrouk tells Al Mal.

Rumors have been circulating that the ban has been lifted, the newspaper says, but local news website Mada Masr, which is still accessible from overseas and locally through virtual private networks, put out an official statement through Facebook saying that it can’t confirm the news “as accessibility varies for users on the same service providers and is still completely blocked on others,” promising to update readers once it gets official word.

Al Borsa and Daily News Egypt are intermittently accessible from inside Egypt, while other sites including Al Jazeera and HuffPost are broadly inaccessible. Al Borsa’s backup domain — elborsanews.com — is steadily accessible.

Don’t expect flights from Russia to be reinstated after Lavrov’s visit: Moscow has not imposed new conditions for resuming direct flights to Egypt, said Russian Foreign Minister Sergey Lavrov, who is in Cairo with Russian Defense Minister Sergey Shoigu for ‘2+2’ talks with their respective counterparts. He said at a joint press conference on Monday with his Egyptian counterpart Sameh Shoukry, however, that the resumption of direct flights between Russia and Egypt would be possible only when Cairo fully implements security agreements, Sputnik and Reuters report. The caginess isn’t surprising considering last week’s statements by Russia’s Deputy Transportation Minister Valery Okulov, who essentially said that talks on restoring flights have gone nowhere. This comes despite repeated reports of an improved security situation at Egypt’s airport. Senior adviser to the Tourism Ministry Waleed El Batouty expresses our frustrations well when he says that all of Russia’s security demands for security have been met, Al Shorouk reports.

The meetings aren’t really about Daba’a or the restoration of flights… Both sides appear to want to these issues forward, judging by statements by Foreign Ministry spokesperson Ahmed Abou Zeid picked up by Al Shorouk. Economic issues that tie in to the restoration of flights — including the Daba’a nuclear power plant agreements — will be part of the 2+2 talks, according to a statement from Ittihadiya on a meeting between both Russian ministers and President Abdel Fattah El Sisi.

…security cooperation is at the core of the visit: “Collaboration between Egypt and Russia is crucial for struggle with terrorism. Coordination of efforts in that sphere is already underway,” Russian state news agency TASS quotes Shoukry as saying at the press conference. Cairo and Moscow are closely coordinating their efforts to eliminate sources of terrorist financing and to take action against states that sponsor terrorists, he added. As we noted yesterday, Libya will likely take center stage in the talks. Moscow is conducting operations there, and media reports continue to cite a Russian presence in Western Egypt (a claim both countries have consistently denied). Security talks also generally include a whiff of an arms agreement, but we have yet to hear anything from either side on where we stand on the deliveries Russian shipborne Ka-52K Katran combat helicopters for Egypt’s Mistral-class helicopter carriers.

Speaking of Libya: Shoukry will discuss the situation there with his Algerian and Tunisian counterparts in Algiers on 5-6 June, according to Algeria’s Foreign Ministry spokesperson, ANSAmed reports.

Security officials let their guard down and allowed terrorism to thrive even though they knew of ongoing security threats, the head of the pro-government Support Egypt Coalition, Mohamed Elsewedy. Elsewedy said officials whose incompetence allowed the attack must be held accountable, according to Al Shorouk. Elsewedy’s remarks were made in the wake of a weekend terror attack that claimed the lives of 29 people traveling to a monastery.

Elsewedy spoke the same day that Minya’s security chief was reportedly sacked. Police Gen. Faisal Doweidar has been reassigned to a new post as deputy chief of security at the Interior Minister effective Wednesday, three security sources told Reuters. Interior Minister Magdy Abdel Ghaffar also ordered a shakeup of deputies in the ministry, including the heads of the Tourism Police, economic crimes unit, and the heads of security for Ismailia and Cairo, AMAY reports.

Also yesterday, the House of Representatives announced its support of President Abdel Fattah El Sisi’s decision to launch airstrikes against terrorists inside and outside Egypt, Al Mal reports.

MP Mohamed Abu Hamed of the Support Egypt Coalition proposed yesterday an anti-hate crime bill meant to replace the religious contempt clauses in the criminal code, Al Shorouk reports. The legislation would see those who accuse any individual or group of being infidels sentenced to either the death penalty or life in prison if their accusations result in a hate crime. The bill, which has the support of at least 80 MPs, also stipulates that discussion and debate of the scriptures of the three Abrahamic religions will not punishable by law and would clearly define what falls under “contempt of religion,” Abu Hamed told the newspaper.