The House of Representatives has started signing off on a basket of measures that will see bns in new spending flow to public servants, low income earners and the poor as part of a drive to shore up the social safety net ahead of the new fiscal year. The next budget will include subsidy cuts that will translate into rising power and fuel prices. Analysts expect this to temporarily drive up inflation, which had eased to 13.1% in April from 13.3% the month before. Just keep it all in context, folks: Inflation was running at north of 30% in May of last year.

House signs off on salary, pension increases worth more than EGP 60 bn: Parliament’s general assembly approved yesterday two special salary increases for civil servants and increased spending on pensions, Al Masry Al Youm reports.

Pay rises for civil servants: All state employees will be given a special raise ranging from EGP 140-160 a month, based on their pay grades. In additional to their annual raises, state employees not covered by the Civil Service Act will be awarded an exceptional hardship raise of 10% on their base salaries, with the minimum increase set at EGP 65. Parliament also decided to add EGP 40 to all civil servants’ base salaries after haggling with Finance Minsiter Amr El Garhy, according to the newspaper. El Garhy reminded everyone that every EGP 10 increase in the size of this social net, will increase costs to the state budget of nearly EGP 3.5-4 bn.

Cops and soldiers are getting pay bumps, too: The House’s Defense and National Security Committee approved a 15% rise in military and police pensions with the start of the new fiscal year, mirroring the raise for civil servants, Al Shorouk reports.

Pensions also look set to rise, with most pensioners getting a 15% bump and the minimum monthly pension climbing to EGP 750 from EGP 500. Social Solidarity Minister Ghada Wali has sent proposals for the Finance Ministry on how the pension increases should work out in practice, according to Al Shorouk. The House Manpower Committee had approved on Sunday the 15% pension hike and new monthly minimum pension.

Raises and pension increases combined will cost state coffers around EGP 60 bn, Prime Minister Sherif Ismail told reporters yesterday.

House Budget Committee signs off on raising income tax exemption threshold: The House of Representatives’ Budget Committee also gave businesses (who in Egypt remit employee income taxes as wage taxes to the state) a small break yesterday, raising the basic personal exemption from income tax to EGP 8,000 from EGP 6,500 previously, according to Finance Minister Amr El Garhy.

BUDGET WATCH- Will parliament pass the FY2018-19 budget today ? The House of Representatives is expected to pass the FY2018-19 budget today (uncharacteristically early) after the general assembly wrapped up yesterday its discussion of the Budget Committee’s report, according to Ahram Gate. Health and education both received additional earmarks to fund initiatives including the new K-12 educational system and the Universal Healthcare Act, both of which are expected to launch later this year. You can tap or click here for our budget refresher.

FinMin holds fast on oil price projection at USD 67/bbl in the FY2018-19 budget: The Finance Ministry appears set to keep its projected average oil price in next year’s budget at USD 67/bbl, Finance Minister Amr El Garhy told the House on Monday, according to Al Mal. He noted that while oil prices had recently surged above the USD 80/bbl mark, prices have recently cooled. Egypt’s oil agreements with Saudi Arabia and Russia will help keep supply and price in Egypt stable, he added. A government document obtained by Ahram Online suggests that the government has been importing the black stuff at a price of USD 75/bbl. Parliament had been so concerned of the impact this rise would have on next year’s budget it debated whether to to set aside more funds in case the government overshoots its deficit target for the year.

This comes as hedge funds are reportedly scaling back their wager on higher oil prices as OPEC and Russia discuss raising production ahead of their meeting on 22 June, the FT reports. Bloomberg is already teasing it as possibly “OPEC’s worst meeting ever, part 2.”

Egypt’s new budget can sustain global oil prices as high as USD 80/bbl, EFG Hermes’ Mohamed Abu Basha suggests in a research note to clients yesterday. While higher oil prices do pose a “temporary downside risk to economic growth” by adding to inflationary pressure and, in turn, affecting the recovery in consumption, Egypt’s strong fundamentals and policies will see it through, according to Abu Basha. He explains that average oil prices of USD 75-80/bbl would weigh the current account deficit down by as little as 0.8%, which would still allow Egypt to pursue fiscal improvements (such as a narrower budget deficit of 8.4% of GDP and a primary surplus of 2%).

Nonetheless, inflationary risk is clearly skewed to the upside, warned Abu Basha. These risks would be especially pronounced if the higher oil prices continue to 2019. “Such uncertainty clearly poses the risk of a relatively extended interruption of the easing cycle, possibly well into 2019,” he added. In the short-term, this risk would depend on how much the government decides to raise fuel prices to cushion the budget deficit against high oil prices, possibly driving inflation to 14-15% in 2H2018.

LEGISLATION WATCH- Draft social welfare act with Finance Ministry for review. A draft of a new proposed Social Welfare Act is now with the Finance Ministry for review, Social Solidarity Minister Ghada Wali said yesterday. The law would amend the social welfare and pensions systems, guarantee the right to unemployment benefits, and establish a new pension fund. The law will require Cabinet approval before being referred to the Council of State (Maglis El Dawla) for review, and the House of Representatives for final sign-off. Wali had said back in March that she expected the law to pass the House by the end of June.

Net foreign currency reserves were broadly stable at USD 44.14 bn in May compared with USD 44.03 bn in April, the central bank announced yesterday. Reserves, which began to climb after Egypt signed a USD 12 bn extended fund facility with the IMF, are at their highest level ever.

Canada’s Aton Resources has moved one step closer to obtaining an exploitation license on its Hamama West gold concession, the company announced in a press release. The Toronto Stock Exchange-listed firm submitted a study by Wardell Armstrong International on the concession to the Egyptian Mineral Resources Authority, a crucial step in its application to obtain the 20-year license. Aton had said in late November last year that it planned to submit the declaration of commerciality, only the second in the modern history of the Egyptian gold mining industry after Centamin.

Just don’t expect a new gold rush until there is regulatory reform: Gold miners continue to push the Egyptian Mineral Resources Authority to change to a tax and royalty system from the current production-sharing regime. As we understand it, Wood Mackenzie is advising the government on reform of the sector, with fresh investment in the industry pending the overhaul. Aton Resources CEO Mark Campbell, writing exclusively for Enterprise last year, noted that, “Egypt could be one of the top mining jurisdictions in the world, but it badly needs to reform its mining policies to attract more companies to invest in developing its mineral resources.” You can read Campbell’s full opinion piece here.

MNHD seeks EGP 1 bn loan from CIB to fund Taj City infrastructure development: Madinet Nasr Housing and Development (MNHD) will be seeking a EGP 1 bn medium-term loan from CIB to fund the development of a T-Zone and infrastructure at its Taj City project. The company’s board of directors signed off on the facility yesterday, the company said in a regulatory filing picked up by Al Mal. MNHD management is currently in talks with SODIC about a potential merger between the two real estate developers.

Misr Insurance Holding told to seek professional help with portfolio restructuring: Public Enterprises Minister Khaled Badawy wants Misr Insurance Holding to seek some professional help, ordering it to seek an investment bank or asset manager to help it restructure its investment portfolio. Badawy also reportedly urged the company to expand the scope of its investments to companies outside Egypt at a meeting with its newly constituted board of directors. The meeting comes as Misr Insurance prepares to list shares on the EGX as part of the state privatization program.

INVESTMENT WATCH- Trade Minister to inaugurate three new Unionaire factories in three weeks: Trade and Industry Minister Tarek Kabil is expected within the coming weeks to inaugurate three new Unionaire Group factories worth a collective USD 100 mn, according to a ministry statement. The factories in Six October City — which will produce an annual 750k television screens, 500k refrigerators, and 300k washing machines in their first phase of operation — are being partially financed through Egyptian-Saudi investments, with Unionaire contributing around EGP 1.5 bn to the project, according to Chairman Mohamed Fathy.

Kabil is also expected to break ground soon on Unionaire’s EGP 1 bn export-focused industrial complex, which will produce heavy-duty electric appliances, such as air conditioners, refrigerators, and washing machines, as the company looks to expand its presence in the Egyptian market and the region. Sources had said last year that the 80,000 sqm area would be complete by July 2019.

Egypt, World Bank sign agreement to launch USD 600 mn second phase of rural sanitation project: Egypt signed yesterday an agreement with the World Bank to begin implementing the second USD 600 mn phase of the WB-funded rural sanitation project, according to an Investment Ministry statement. The second phase, which will be financed by the World Bank and the Asian Infrastructure Investment Bank, will extend sanitation services to villages in Damietta, Gharbiya, and Menoufia that currently discharge untreated sewage into the Al Salam Canal. Egypt and the World Bank had signed on to begin the first USD 550 mn phase of the project back in 2015.

No shakeup of governors … for now: President Abdel Fattah has decided to keep the nation’s governors in place for the time being pending a wider shuffle, according to a presidential decree published in the Official Gazette yesterday. It is unclear when the new appointments are anticipated. The Local Administration Act stipulates that governors and their deputies resign from their posts at the beginning of a new presidential term. El Sisi officially began his second presidential term on Saturday.

MOVES- Former Canary Wharf executive hired by Saudi gov’t for Red Sea tourism component of NEOM. The Saudi government appointed John Pagano (LinkedIn) as CEO for its new joint stock Red Sea Development Company (RSDC), according to Asharq Al-Awsat. The company will oversee the tourism projects KSA plans develop on its side of the Red Sea Coast as part of a joint mega-city and business zone with Egypt, otherwise known as the Robot Utopia of NEOM.

 Mo Salah made the final lineup of Egypt’s World Cup squad, according to the Egyptian Football Association (EFA). Salah appears to be showing positive signs of recovery from his shoulder injury. The story is being widely picked up by the foreign press, with the Associated Press noting that the Liverpool top scorer “almost single-handedly led Egypt to its first World Cup since 1990.” In other football news yesterday, national team coach Hector Cuper was recently declared the highest paid among Africa’s World Cup coaches this year, coming in at number 11 out of 32 World Cup-bound managers on a pay list released by the Daily Mirror.

CORRECTION- In last week’s story on internet subscribers in Egypt reaching 40 mn in FY2017-18, we mistakenly noted that mobile internet users were down to 100.2 mn. It was total SIM cards in circulation that had dipped slightly to 100.2 mn. The story has been corrected on our website.