The Cabinet decision follows earlier promises to investigate election fraud and official corruption as well as an announcement that a detained Google Inc. executive who was one of the most prominent youth organizers has been released.
The gestures so far have done little to persuade the tens of thousands occupying downtown's Tahrir Square to end their two-week long protest. The protesters have vowed to stay put until Mubarak steps down.
Newly appointed Finance Minister Samir Radwan said some 6.5 billion Egyptian pounds ($960 million) will be allocated to cover the salary and pension increases, which will take effect in April for the 6 million people on public payrolls.
"We don't trust him — he's made many promises in the past," said Salih Abdel-Aziz, an engineer with a public sector company, referring to the president. "He could raise it 65 percent and we wouldn't believe him.
As long as Mubarak is in charge then all of these are brittle decisions that can break at any moment."
Following widespread labor unrest in public sector factories in 2008, Mubarak announced a 30 percent increase in public sector salaries that appeared to temporarily blunt public anger at the time.
The government appears confident in its ability for the moment to ride out the unprecedented storm of unrest, and maintain its grip on power, at least until September elections, but it has made a number of moves in response to protesters' demands.
Egypt's state-run news agency reported Monday that Mubarak ordered the country's Parliament and its highest appellate court to re-examine lower-court rulings disqualifying hundreds of ruling party lawmakers for campaign and ballot irregularities, that were ignored by electoral officials. The ruling National Democratic Party won more than 83 percent of the 518 seats in the 2010 parliamentary elections, which were widely condemned as being rigged.
Former Interior Minister Habib El-Adli has appeared before military prosecutors and may face charges of causing a breakdown in order during anti-government protests, a security source said.
The source said Adli, who was in court on Sunday, could be charged with withdrawing security forces from the streets during the uprising, ordering live fire on protesters and releasing prisoners from jail.
US President Barack Obama said he saw some progress in talks between the government and opposition groups. "Obviously, Egypt has to negotiate a path and they're making progress," Obama told reporters while returning to the White House after a speech to a business group.
Meanwhile, the rest of the city was coming back to normal. Banks were open for limited hours along with many shops. The stock market announced it would reopen Sunday, though schools were still shut for the midyear holiday. A curfew imposed in three cities was shortened by an hour to between 8 p.m. and 6 a.m.
