Saudi Arabia Will Give Cash to Poorer Citizens Hit by Austerity

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Saudi Arabia will begin cash transfers to low- and middle-income citizens as it plans to raise domestic energy prices, part of a program to overhaul the kingdom’s oil-dependent economy.

Monthly cash payments will start on Dec. 21 to compensate Saudis affected by measures including subsidy cuts and new taxes, officials said on Tuesday. The cabinet approved the so-called Citizen’s Account program, which will be reviewed quarterly, at the same time they ratified a gradual change in the prices of fuel and electricity starting in the first quarter.
Crown Prince Mohammed bin Salman is leading the effort to reduce Saudi Arabia’s addiction to oil, but many of the reforms he’s implemented have hit the wallets of Saudis. He wants to diversify the economy, create the world’s largest sovereign wealth fund and increase employment — goals many in the kingdom support. Less popular are cuts to long-standing subsidies, reduced pay for civil servants — a measure that was later reversed — and new taxes, including a value-added tax planned for January. The Citizen’s Account is designed to offset those measures with extra cash for those that need it most.

More than 3.7 million households applied for the benefits, representing 13 million people — more than half of the population, Ali Rajhi, general manager of the program, said in a press conference on Tuesday. Not all those who applied were found to be eligible, he said.

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The total cost of the program would depend on the income and size of families that qualify, with more details to be released later, Rajhi said.

Saudi Arabia plans to adjust adjust gasoline, electricity and jet fuel prices in the first quarter, the official Saudi Press Agency reported. Gasoline prices are set to increase by about 80 percent, while jet fuel prices will be raised to international levels in one go, with the changes planned for January, according to a person with knowledge of the matter. Prices of gasoline and other fuels such as diesel, kerosene and heavy fuel oil will be increased incrementally over several years, the person said.

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When determining the size of cash transfers, authorities will consider the direct and indirect burden on family budgets from higher energy prices and new taxes, Rajhi said. Citizens who are found ineligible or who are unhappy with the amounts they’ve been allocated can appeal through a formal process, he said.

In the future, the Citizen’s Account will become the umbrella for all government welfare payments, he added. In later stages of implementation, benefit allocation will depend not only household income but also on overall wealth, he said.

Source Credit: Bloomberg

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