Wherein households will receive cash allowances to cope with rising costs in the region

Last December Saudi Arabia’s government announced plans of a household allowance scheme which was designed to soften the blow of increasing costs of economic reforms in the region. Despite the announcement, the move failed to materialise – partly due to planning difficulties, sources said.

In the current era of low oil prices, reforms such as fuel price hikes and changes to public sector salaries and allowances have reduced the disposable incomes of many households. Moreover, many more such reforms are on the way as the government moves to strengthens its finances. As such, the Saudi government hopes that the launch of a system of financial allowances will help low- and middle-income households cope with the costs of economic reforms.

In its December statement, the government said it would pay the allowance directly to households in cash, and that the first payment would be made before the next hike in energy prices. Allowances would be designed to avoid promoting excessive consumption and would vary depending on the size and affluence of households.

For example, the government estimated that a family of six earning up to 8,699 riyals ($2,320) a month might initially receive a monthly allowance of 1,200 riyals. Authorities originally envisaged spending between 20 billion and 25 billion riyals on the scheme in 2017, rising to 60-70 billion riyals in 2020.

Sources familiar with the fiscal planning said Saudi Arabia’s 2018 state budget was expected to be announced next week, probably on Dec. 19, but that the date had not been finalised.