Saudi Arabia Set to Start Cash Transfers to Cushion Reform Blow
Saudi Arabia Set to Begin Cash Transfers for Poorer Citizens
(Bloomberg) -- Saudi Arabia will begin cash transfers to low- and middle-income citizens this month, part of efforts to cushion the blow for families as the kingdom overhauls its 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 Tuesday. The cabinet approved the so-called Citizen’s Account program, which will be reviewed quarterly, at the same time it ratified changes to the prices of fuel and electricity, planned for the first quarter next year.
Crown Prince Mohammed bin Salman is leading the push to reduce Saudi Arabia’s addiction to oil, but many of the reforms he’s implemented have hit the wallets of Saudis. The Citizen’s Account is designed to offset those measures with extra cash for those who need it most. A smooth roll-out is key in a country where the social contract has been built on an exchange of government largess for political loyalty.
Implementation will “impact the government’s popularity among Saudi citizens,” said Raphaele Auberty, Middle East and North Africa country risk analyst at BMI Research. “If the program is not perceived as fair, we could see signs of popular discontent.”
Failing to reach the most vulnerable could hurt economic growth, but overly generous transfers might burden government finances, Auberty said.
More than 3.7 million households registered, representing 13 million people -- more than half of the population, Ali Rajhi, general manager of the program, said Tuesday. Officials did not answer questions about how many people were eligible to receive payments, saying only that it was less than the total registered. The amount disbursed to each household will depend on family size and income, with more information to be released later, Rajhi said.
Those found ineligible or who are unhappy with the amounts they’ve been allocated can appeal, he said.
“Given how soon the program is to start, it is surprising more details were not made available,” said Raza Agha, chief Middle East and North Africa economist at VTB Capital Plc. “This information is important to get a sense of the program’s fiscal cost.”
Agha estimated that if 3.7 million households were to receive benefits of around 1,200 riyals a month for a family of six, the bill could be around 2 percent of economic output.
It’s possible the benefits will be less generous than expected, because the government’s aim to balance its budget by 2020 is being revised with an extended timeline, said Jean-Michel Saliba, a London-based economist at Bank of America Merrill Lynch.
“If the fiscal balance program is less forceful in terms of changes, then they may need to compensate people less,” he said.
Saudi Arabia plans to adjust gasoline, electricity and jet fuel prices in the first quarter, the official Saudi Press Agency reported. Gasoline prices will 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.
--With assistance from Nour Al Ali Tarek El-Tablawy Mahmoud Habboush and Sarah Algethami
To contact the reporters on this story: Vivian Nereim in Riyadh at vnereim@bloomberg.net, Glen Carey in Riyadh at gcarey8@bloomberg.net.
To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Mark Williams, Stuart Biggs
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