Saudi Arabia unveils first public sector pay cuts

A Saudi man shows Saudi riyal banknotes at a money exchange, in Riyadh, Saudi Arabia (30 January 2016)Image copyright
Reuters

Image caption

Public sector wages accounted for almost half of government spending in 2015

Saudi Arabia has unveiled pay cuts for government employees for the first time, as it attempts to further rein in spending at a time of low oil prices.

A royal decree said ministers’ salaries would be reduced by 20%, and housing and car allowances for members of the advisory Shura Council cut by 15%.

Lower-ranking civil servants will see wage increases suspended, and overtime payments and annual leave capped.

About two-thirds of working Saudis are employed in the public sector.

Their salaries and allowances accounted for almost half of government spending in 2015, or about $120bn (£93bn), and contributed to a budget deficit of $98bn.

‘Back to time of poverty’

BBC Middle East analyst Sebastian Usher says the unspoken contract that once existed between ordinary Saudis and the ruling elite – in which citizens could all but expect a none-too-stressful job for life in return for accepting the status quo – has long been eroding.

But, our correspondent adds, the deficit highlighted the urgent need for change.

In April, Crown Prince Mohammed bin Salman unveiled a reform plan intended to reduce the government’s spending and lessen its dependence on oil revenue.

72%

of revenues come from oil

  • $98bn the budget deficit in 2015

  • 80% increase in petrol prices last year in the country

  • $2.5tn size of state-owned oil giant Aramco

  • $2tn potential value of the sovereign wealth fund the Saudis are creating

The “Vision 2030” initiative aims to cut the public sector payroll to 40% of the budget by the start of the next decade and boost private sector employment.

The government also cut the generous subsidies for petrol and utilities in December, but complaints prompted Prince Mohammed to sack the water and electricity minister six months later.

Some Saudis have already taken to social media to lament what they remember as better days under King Abdullah, who died last year.

“God be with the citizens, we are back to the time of poverty,” wrote Rayan al-Shamri on Twitter.

Jamal Khashoggi, editor of Al-Arab News, told Reuters news agency: “It’s one more economic measure to balance spending. Of course people don’t like it, but it’s a sign of the times.”

“Probably the teachers and many others will be affected by it. It shows why it’s important for the private sector and Saudi GDP to diversify,” he added.

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