Saudi King declares allowances amid rising cost of living

RIYADH: Saudi Arabia’s King Salman ordered a monthly payment of 1,000 riyals (RM1,066) to state employees over the next year in compensation for the rising cost of living after the government hiked domestic gas prices and introduced value-added tax (VAT).

In a royal decree published by state news media yesterday, the king also ordered the payment of 5,000 riyals (RM5,330) to military personnel serving on the frontlines in Yemen where the kingdom is fighting a near three-year-old war.

Saudi Arabia, the world’s top oil exporter, roughly doubled gasoline prices on Monday as part of a broad reform initiative aimed at diversifying its economy.

A five per cent VAT on a broad range of goods and services came into effect on the same day.

The new orders were an acknowledgment of “the increased burdens for some segments of the population following the necessary measures the state took to restructure the economy”, the decree said.

King Salman directed the state to bear the burden of VAT in some situations, including special health and education services as well as the first purchase of a house that is valued at up to 850,000 riyals (RM906,115).

Allowances for students, retirees and social security recipients were also boosted.

The decree did not reveal the total cost of the new allowances, but it appeared to be considerably smaller than some past handouts, and therefore unlikely to have much impact on economic growth or the state budget deficit.

About 1.18 million Saudis are employed in the public sector and there are over 1.23 million pensioners and beneficiaries of pension payments, the central bank says.

This suggests a total package cost of about 23bil riyals (RM24.51bil), according to Reuters calculations.