Saudi Arabia restores state employee bonuses

Bonuses scrapped were reinstated as higher-than-expected revenue helped to drive down budget deficit

Saudi Arabia’s King Salman restored bonuses and allowances for state employees, scaling back an austerity programme that generated widespread criticism among citizens used to generous state handouts.

The government said bonuses cancelled in September were reinstated because higher-than-expected revenue helped to drive down the budget deficit. Minister of State Mohammed Alsheikh said in a statement to Bloomberg that the injection of more money was expected to stimulate economic growth, but others said the kingdom’s rulers were responding to the public discontent the cutbacks created.

The decision “constitutes a step back in terms of forging a new social contract that no longer offers the Saudi public cradle-to-grave welfare,” said James M Dorsey, a Saudi specialist and senior fellow in international studies at Nanyang Technological University in Singapore. It suggests the government is worried that its economic overhaul plan hasn’t been accepted “by segments of the population who have the most to lose from diversification and streamlining of the economy, including the bureaucracy,” he said. 

King Salman also pressed on with a shakeup that has installed his children in key government positions, appointing one son as ambassador to the US and promoting another within the energy ministry. Prince Abdulaziz bin Salman was named Minister of State for Energy Affairs, while Prince Khalid bin Salman was appointed envoy to Washington.

The bonus cutbacks were announced in September as part of an ambitious plan led by Deputy Crown Prince Mohammed bin Salman to repair public finances and overhaul the oil-dependent economy in an age of depressed energy prices.

Saudi Arabia cuts deficit by half in Q1

Saudi Arabia's deputy economy minister said on Saturday the kingdom had reduced its deficit in the first quarter of 2017 by more than half in part because of prudent public spending. "The fact that the first quarter deficit was 26 billion riyals ($6.93 billion) when 54 billion riyals was projected at the beginning of the year. This is a very excellent step toward rationalised spending," Mohammed al-Tuwaijri, deputy minister of economy and planning told state-run Ekhbariya TV. Saudi's deficit shrank to 297 billion riyals ($79 billion) in 2016, down from a record 367 billion-riyal gap in 2015. In its 2017 budget plan, Riyadh said the deficit would shrink further this year to 198 billion riyals because of higher oil prices and non-oil revenues.