Saudi to announce launch of household allowance system

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Saudi Arabia’s government will announce on Tuesday the launch of a system of financial allowances to help low and middle-income households cope with the costs of economic reforms, an official source told Reuterson Monday.

The government originally said last December that it planned to introduce such a system. Reforms such as fuel price hikes and changes to public sector salaries and allowances have reduced the disposable incomes of many households, and more such reforms are on the way as the government strengthens its finances in an era of low oil prices.

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In its December statement, the government said it would pay the allowance directly to households in cash, and that the first payment would be made before the next hike in energy prices.

Allowances would be designed to avoid promoting excessive consumption, and would vary depending on the size and affluence of households. Only lower-income Saudi households would be fully compensated for the economic burden of the reforms.

For example, the government estimated that a family of six earning up to SAR8,699 ($2,320) a month might initially receive a monthly allowance of SAR1,200.

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The government initially aimed to introduce the system during 2017 but it was delayed, partly by planning difficulties, sources said. Authorities originally envisaged spending between SAR20bn and SAR25bn riyals on the scheme in 2017, rising to SAR60-70bn in 2020.

Sources familiar with fiscal planning said Saudi Arabia’s 2018 state budget was expected to be announced next week, probably on December 19, but that the date had not been finalized.

Source Credit: Gulf Business

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