Saudi Arabia has reinstated bonuses and other financial perks for public sector workers and military personnel.
King Salman issued a decree, reversing a decision made in September 2016 to scale back civil service spending to reduce the country’s budget deficit. Some ministers had been on the receiving end of a 20 per cent pay cut, which has now been reversed.
“The royal order returns all allowances, financial benefits, and bonuses to civil servants and military staff,” said the decree.
Government employees make up about two thirds of the Kingdom’s workers, so the decision was unpopular. It was part of a raft of initiatives put in place recently to grow the non-oil private sector and encourage more people to start careers outside the public sector. In particular, an ambitious new digitisation plan is expected to create up to half a million new jobs by 2020.
“When the cuts were announced last year, it helped the budget deficit,” John Sfakianakis, director of economic research at the Gulf Research Center, told Bloomberg. “They can let off the pressure on the salaries part now.”
The price of Brent crude has shown signs of recovery too – its continued tumble from mid-2014 to its lowest point in January 2016 (around US$28) had been responsible for a raft of economic changes across the GCC.
“The first quarter  deficit was SAR 26 billion when SAR 54bn was projected at the beginning of the year. This is an excellent step toward rationalised spending,” Saudi Arabia’s deputy minister of economy, Mohammed Al Tuwaijri, told Ekhbariya TV.
The central bank’s governor, Dr Ahmed Al-kholifey, has predicted the deficit will drop further this year, possibly even moving into a surplus.
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