Survivors have said up to 450 migrants were on board the overcrowded fishing vessel headed to Italy from Egypt when it keeled over on Wednesday off the port city of Rosetta.
Egypt's military has said it rescued 163 survivors and that recovery attempts were continuing.
The International Organization for Migration said most of those rescued were Egyptians but they also included Sudanese, Eritreans, a Syrian and an Ethiopian.
The tragedy sparked an emergency cabinet meeting and also topped the agenda of talks between President Abdel Fattah al-Sisi and Egypt's security chiefs yesterday.
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A new bill being submitted to parliament would include "deterrent penalties" against people smugglers.
Egyptian authorities have so far in 2016 foiled 110 attempts to smuggle migrants to Europe, Interior Minister Magdy Abdel Ghaffar told the cabinet.
The UN refugee agency expects 2016 to be the deadliest year on record for Mediterranean crossings by migrants.
More than 4,600 non-Egyptians, many of them Sudanese and Ethiopians, have been arrested this year trying to depart from Egypt's northern coast, the UNHCR said on Friday.