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Thursday, 1 April 2021

Cabinet approves new raises for civil servants

Public sector employees not covered by the Civil Service Act are officially in line for raises of 13% of their basic salaries at the start of the next fiscal year (which starts on 1 July), under incentives approved by cabinet during its weekly meeting yesterday, an official statement read. The same decision also stipulates a EGP 75 minimum increase to the monthly gross salaries of civil servants whose employment is not covered by the act, who will receive annual raises at the start of the fiscal year. It also increases monthly bonuses for state officials by a minimum of EGP 175 and a maximum of EGP 400, depending on rank. Public sector wage increases need to be ratified by the House of Representatives before taking effect.

Minimum wages are also up: President Abdel Fattah El Sisi last month instructed the government to raise the minimum wage for civil servants to EGP 2.4k from EGP 2k as of the next fiscal year, a move which is expected to cost around EGP 37 bn. The president also ordered a 13% hike for pensioners and annual raises of 7% for civil servants covered by the Civil Service Act.

Meanwhile, the executive regulations for the SMEs Act will see the light of day soon under a separate cabinet decision. The regulations will stipulate the conditions for SME access to state-supported financing, as well as provide more details on incentives the government has in store for small and medium-sized businesses, and companies that provide services to startups and entrepreneurs. They will also cover formal licensing requirements for small and medium-sized companies, will specify the licensing fees, and will outline how SMEs can apply for tax relief.

What do we know about the SMEs Act? While the cabinet statement was light on details, we think the law, ratified in July 2020, will exempt SMEs from stamp tax and contract fees when establishing the company. It will also provide those businesses with credit facilities for five years from their commercial registration date, and afford tax and non-tax incentives to support the sector and encourage small businesses to go legit. Tax brackets laid out in the law are based on businesses’ annual sales. The overall tax incentives package could cost the government EGP 1.5-2 bn each year.

Also approved by cabinet yesterday:

  • A decision to renew a package of measures to support the tourism sector still hard-hit by the pandemic, including a payment holiday for real estate taxes and other state dues, and haircuts on landing and ramp fees in airports in tourist destinations.
  • A decision to set the price the government purchase price for local farmers’ wheat at EGP 705-725 per ardib, up EGP 25 from last year.
  • Plans to build 230k new homes under the state’s social housing scheme and allow families that apply for social housing access to the CBE’s recently-announced EGP 100 bn subsidized mortgage lending program.

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