Restoring Saudi state allowances will cost SAR5-6bn

The retroactive reinstatement of Saudi Arabian civil servants’ allowances will cost the government about SAR5bn-SAR6bn ($1.3bn to $1.6bn), the finance ministry said on Thursday.

Its budget pressured by low oil prices, Riyadh slashed the allowances last September to save money, but announced in April that it was restoring them to stimulate economic growth and because its first-quarter deficit was smaller than expected.

A royal order published by state news agency SPA on Wednesday, and which accompanied the announcement of Prince Mohammed bin Salman’s promotion to the post of crown prince, took the further step of restoring the allowances retroactively back to September.

In an emailed statement in response to questions by Reuters, the ministry said the SAR5-6bn cost of the latest step worked out to only about 0.6-0.7 per cent of budgeted state spending in 2017 or almost 0.2 per cent of gross domestic product, which could easily be covered by contingency funds.

“This should not impact the overall budget or the budgeted deficit but we expect that it will contribute towards increased consumer spending and confidence, serving as a boost to economic growth and ensuring stability in consumer demand trends going forward,” Finance Minister Mohammed al-Jadaan said in the statement.

He added that the government remained committed to its goal of balancing the budget by 2020, noting that as a step towards this, a previously announced increase in fees charged on foreign residents of the kingdom would take effect next month.