Saudis cut government employee pay, benefits

OREANDA-NEWS. September 27, 2016. Saudi Arabia intensified its drive to cut public spending today by announcing a 20pc cut in wages and reductions in financial perks for public servants. The move indicates the extent of financial pressure the country faces because of lower oil prices.

The cuts were announced by royal decree and in an official statement following the weekly cabinet meeting chaired by King Salman bin Abdel-Aziz.

Government ministers will see their salaries cut by 20pc as of 1 October, and members of the unelected Shura consultative council will see their housing and transport allowances dropping by 15pc.

Other government employees, who comprise around 65pc of the working population, will have to forego salary increases and bonuses during the Islamic year 1438, which begins on 1 October. Overtime pay will also be reduced.

The statement announcing the unprecedented cuts gave no reason for them, but they are almost certainly aimed at cutting the public wage bill, which comprises over 50pc of budgeted government spending.

Soldiers deployed along the country's southern border with Yemen, where Saudi Arabia has intervened militarily against Houthi-led rebels, will be exempt from the cuts and will get an annual salary increase.

In addition to reducing government spending and narrowing the budget deficit, cutting public wages and limiting their future growth is also seen as a long-term economic reform measure. It is compatible with a drive to turn the private sector into an engine of economic growth under a wide-ranging economic and social reform roadmap known as "Vision 2030," which was unveiled earlier this year. Government spending is currently the main economic driver in Saudi Arabia. Government jobs are more attractive to the population than private sector jobs because the latter offer less generous salaries and benefits.