Saudi program to replace old gas assistance with targeted subsidies

The Kingdom of Saudi Arabia is slated to embark on a multi-billion dollar project to replace broader energy subsidies with a set of financial supports for some of the country’s most vulnerable citizens.

The program, which Arabic-language newspapers have referred to as the Citizen Account, will put the equivalent of over $6 billion into the 2017 budget to help subsidize water and energy utility costs for lower-income Saudis.

A Feb. 26 report on Zawya.com by Nada al Rifai describes the program as “a move seen as seeking to deflect public discontent and to ensure a more equitable distribution of wealth.”

Rifai notes that as oil revenues have started to dry up, KSA has shuttered some of its more indulgent oil and gas subsidies, which are not income-dependent, and that instituting a more targeted program won’t be universally popular.

However, the Saudi government sees the large spending project as a way to genuinely support low-income families who need financial help the most. Rifai writes:

“By directing financial help to those that most need it rather than providing unnecessary energy subsidies to wealthy citizens, the government can reallocate the money saved to help develop the kingdom’s non-oil sectors, as per the National Transformation Program, which aims to reduce reliance on the hydrocarbon sector and expand the private sector.”

An article by Sharif M. Taha in Arab News Jan. 9 identifies major beneficiaries of the program as: “Saudi families, Saudi independent individuals, beneficiaries of social security, Saudi mothers married to foreigners, and holders of transport cards.”

Taha’s article reveals that the Saudi Ministry of Labor and Social Development has put out a guide to help residents access the funds available through the program. Taha also reports the Citizen Account will be linked to other forms of assistance, like the Housing Ministry’s “Ejar Program.”

The Gulf News Journal spoke on March 2 with Mike Toney about the Citizen Account program. Toney holds a master's degree in international business and spent time in the Gulf region as a member of the U.S. military.

“There’s a tradition that involves protecting women and children, and vulnerable populations.” Toney said, noting that such a program would likely resonate with elements of Islamic culture. “There would be religious reasons to protect these people.”

Also, he said, although some Saudi citizens may get along fine without any subsidies, others are deeply in need.

“It’s an oil-rich country,” Toney said, “but it’s also a country that has economic disparity. It’s not surprising that KSA leaders would look to redistribute the wealth a little bit.”

Toney also mentioned that changes in oil prices, which are so rapidly and profoundly changing many Gulf societies, are probably part of the backdrop forming the context of the program’s emergence.

For example, he said, it’s likely that many subsidy recipients are going to be Aramco workers or workers at other oil-based jobs who were laid off when oil prices declined.

“This could be a secondary or tertiary effect of oil prices falling,” Toney said.

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