Saudi king extends allowances as biggest budget ever is announced

Government says it will increase spending by more than 7 percent in 2019 to ignite economic growth.

King Salman
King Salman signs budget documents during a meeting in Riyadh on Tuesday [Bandar Algaloud/Saudi Royal Court]

Saudi Arabia’s King Salman on Tuesday ordered the continuation of public sector cost-of-living allowances and then announced a $295bn budget for 2019, the kingdom’s biggest ever.

The budget announcement projected a $35bn shortfall, amounting to a deficit for the sixth year in a row because of low oil prices.

“We are determined to go ahead with economic reform, achieving fiscal discipline, improving transparency and empowering the private sector,” King Salman said in a televised speech.

In a pre-budget statement in September, the government said it would increase spending by more than 7 percent in 2019 to help cut unemployment and increase sluggish economic growth.

Unemployment – hovering at about 12 percent as of last summer – is at its highest level in a decade.

Under the Vision 2030 plan pushed by Crown Prince Mohammed bin Salman, Riyadh is seeking to create more jobs for Saudis, but businesses have been hit hard by tax rises and other steps to narrow the government’s budget deficit.


Quotas and fees on hiring foreign workers have pushed hundreds of thousands of foreign workers to leave the country in the past 12 months, hurting domestic demand and causing the economy to shrink last year for the first time since the global financial crisis in 2009.

‘Social protection’

According to a royal order published by the state news agency SPA, civil servants and soldiers will continue to receive a monthly allowance of 1,000 riyals ($266). Allowances will also continue for pensioners and social security recipients, and student benefits will increase by 10 percent.

“That is for one fiscal year until completion of the study of the social protection system,” the order said, without providing details.

Businesses have struggled to deal with higher electricity and fuel prices and a five percent value-added tax (VAT) introduced at the start of the year. The finance ministry said it has collected $12bn from VAT so far.

Prince Mohammed said non-oil revenues increased from $34bn in 2014 to $77bn this year and are estimated to reach $83.5bn or one-third of total revenues.

Riyadh withdrew hundreds of billions of dollars from its reserves and borrowed tens of billions of dollars from the domestic and international markets to plug the budget deficit.

Finance Minister Mohammed al-Jadaan told a news conference public debt was projected to rise to 21.7 percent of gross domestic product (GDP) from its current level of 19.5 percent.

Source: News Agencies