Saudi restores public sector allowances as new Crown Prince appointed

The order is anticipated to restore six months of annual bonus to state employees

Saudi Arabia’s government has restored financial allowances to civil servants and military personnel retroactively to mark the appointment of Prince Mohammed bin Salman to the post of crown prince.

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’s promotion, took the further step of restoring the allowances retroactively back to September.

SPA gave no further details but Mazen al-Sudairi, head of research at Al Rajhi Capital, a top Saudi financial firm, said the order would have the effect of restoring six months of annual bonus to state employees.

He estimated the cost of this at SAR8 or SAR9bn ($2.1bn to $2.4bn). “It won’t have any significant impact on this year’s spending,” he said. The government originally estimated a budget deficit of SAR198bn for 2017.

Finance ministry officials could not be contacted for comment.