Saudi Arabia’s King Abdullah ordered sweeping increases in spending, including $67 billion on housing and funds for the military and religious groups that backed the government’s ban on domestic protests.
The new package, which follows a $36 billion handout announced on Feb. 23, will probably help prevent unrest from gathering pace in the kingdom, analysts said. A call for a March 11 demonstration in the kingdom failed to materialize after the government deployed troops at designated assembly points for the rally and senior clerics denounced protests as un-Islamic.
“This will certainly buy the regime time,” Rawad Hakme, portfolio manager at EFG Hermes U.A.E. Ltd, said by e-mail today. “Economically speaking, these measures may resolve things to a certain extent, but ultimately people are hungry for democracy, which money can’t buy.”
More than two months of unrest across the Middle East and North Africa has toppled the Egyptian and Tunisian presidents and led to a civil war in Libya and deadly clashes in Saudi Arabia’s neighbors, Yemen and Bahrain. Demonstrators are demanding civil rights, higher living standards and the removal of entrenched autocratic regimes.
Saudi troops intervened earlier this week in Bahrain, where mainly Shiite protesters called for free elections and a constitutional monarchy. The kingdom’s own Shiite minority has held regular demonstrations for the past few weeks calling for the release of Shiite prisoners.
The new decrees didn’t address political reforms requested in petitions sent to the king by Shiite and Sunni intellectuals and scholars recently.
“The package was mostly for the military, security and religious establishments,” said Jaafar Shayeb, a human-rights activist in the eastern city of Qatif. “There was very little for the average citizen and nothing regarding political reform, elections and changing the government.”
The new spending plans may cost the government as much as 350 billion riyals ($93 billion), according to John Sfakianakis Riyadh-based chief economist at Banque Saudi Fransi. (BSFR) That’s equivalent to just under a quarter of Saudi gross domestic product. The new measures supplement previous announced spending plans, Sfakianakis said.
Today’s package was announced in a royal decree read on state television. Saudi Arabia needs to create 5 million jobs for nationals by 2030, Labor Minister Adel Faqih said in January. The unemployment rate is as high as 43 percent for Saudis between the ages of 20 and 24.
“We are at a very critical time and the number one priority is to keep the people satisfied,” said Amro Halwani, senior equity sales trader at Shuaa Capital PSC (SHUAA) in Riyadh.
Saudi Basic Industries Corp.’s bonds rose, pushing the yield to the lowest in almost a month, after the spending measures were announced. Sabic’s $1.5 billion of 9.5 percent notes due August 2015 rose to 105.8 percent of face value, pushing their yield to 7.9 percent, the lowest since Feb. 21, prices on Bloomberg show. Bonds of the state-owned petrochemicals maker are used as a proxy for the government, which has no outstanding debt.
The government in August announced a $385 billion, five- year spending plan to help tackle joblessness and stop young men from turning to more radical Islam.
The king today ordered the construction of 500,000 houses for Saudis at a cost of 250 billion riyals, and raised the value of mortgages provided to nationals by the country’s Real Estate Development Fund to 500,000 riyals from 300,000 riyals. The government fund provides interest-free loans to citizens across the kingdom.
“They will not be able to do all these measures in one year,” Sfakianakis said. “They could spread it out over the next 3-5 years.”
“Some will be immediately enforced, like the bonuses, but the housing, you won’t be able to build half a million housing units in one year,” he said. “You will not be able to spend more than at best 25 percent of what they have outlined, excluded the bonuses, salaries.”
King Abdullah also allocated 1.2 billion riyals to be spent on mosques and in support of clerical institutions including the religious police, or Mutawa’a, who enforce the austere strain of Islam the kingdom follows. The decree also ordered the media not to criticize the religious establishment.
Senior Muslim scholars have been vocal in their opposition to calls of protest and have issued decrees banning them. Their words carry weight in the mostly conservative country and their support for the government at this sensitive time is crucial.
The king boosted the internal security forces by 60,000 and ordered promotions in the military. He also decreed the creation of an anti-corruption agency, added 500 jobs to the Ministry of Trade to monitor prices and allocated 16 billion riyals to the building and expansion of hospitals and medical centers.
He granted all government employees two months of their salaries and students a two-month payment. The king also set a minimum wage of 3,000 riyals a month for all Saudis.
Saudi Arabia, an absolute monarchy, was classified as the least democratic country in the Middle East in the Economist Intelligence Unit’s 2010 Democracy Index.
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