Package of handouts to Saudi Arabian citizens to cost govt about $13 bn

Saudi authorities had already announced plans to push the timeline for balancing the budget to 2023

A package of handouts to Saudi Arabian citizens to compensate them for cost of living increases will cost the government about 50 billion riyals ($13.3 billion) this year, the information minister was quoted as saying on Sunday.

"The allocation of 50 billion riyals for this decree indicates the leadership's concern for the people's comfort and quality of living," Minister of Culture and Information Awwad bin Saleh Alawwad told the Saudi-owned Al Sharq Al Awsat newspaper.

On Saturday, King Salman ordered a monthly payment of 1,000 riyals to state employees over the year in compensation for the rising cost of living after Riyadh hiked gasoline prices and introduced value-added tax. Pensioners and soldiers will also be given bonuses, while the government will bear the cost of VAT in some situations, such as the first purchase of a home.

Alawwad also repeated previous government statements indicating Riyadh would spend 30 billion riyals this year on the Citizens Account, a household allowance scheme designed to reduce the impact of austerity policies on low and middle-income Saudi families.

Saudi Arabia, the world's top oil exporter, roughly doubled domestic gasoline prices last week as part of reforms aimed at diversifying its economy. A 5 percent VAT on a broad range of goods and services came into effect on the same day.

Private economists have estimated the government will raise about 40 billion riyals in 2018 through VAT. The government did not announce how much money it expected to make from the gasoline price hike, but previous statements by officials have suggested it would be in the tens of billions of riyals.

A state budget plan released last month projected a deficit of 195 billion riyals, or 7.3 percent of gross domestic product, in 2018. The budget appeared to assume an average oil price of about $55 a barrel; Brent crude is now around $67, so Riyadh may be able to afford the royal handouts without any damage to its finances.