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|11 December, 2017

Saudi to announce launch of household allowance system on Tuesday -source

System of financial allowances to help low- and middle-income households cope with the costs of economic reforms: sources

Image used for illustrative purpose. A Saudi money changer displays Saudi Riyal banknotes at a currency exchange shop in Riyadh, Saudi Arabia September 29, 2016.

Image used for illustrative purpose. A Saudi money changer displays Saudi Riyal banknotes at a currency exchange shop in Riyadh, Saudi Arabia September 29, 2016.

REUTERS/Faisal Al Nasser
RIYADH - Saudi Arabia's government will announce on Tuesday the launch of a system of financial allowances to help low- and middle-income households cope with the costs of economic reforms, an official source told Reuters on Monday.

The government originally said last December that it planned to introduce such a system. Reforms such as fuel price hikes and changes to public sector salaries and allowances have reduced the disposable incomes of many households, and more such reforms are on the way as the government strengthens its finances in an era of low oil prices.

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. Only lower-income Saudi households would be fully compensated for the economic burden of the reforms.

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.

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The government initially aimed to introduce the system during 2017 but it was delayed, partly by planning difficulties, sources said. 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 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.

(Reporting by Reem Shamseddine; Writing by Andrew Torchia) ((andrew.torchia@thomsonreuters.com; +9715 6681 7277; Reuters Messaging: andrew.torchia.thomsonreuters.com@reuters.net))