Feb. 23 (Bloomberg) -- Saudi Arabia’s King Abdullah boosted spending on housing by 40 billion riyals ($10.7 billion), and earmarked more funds for education and social welfare amid popular uprisings sweeping the Arab world.
The social security budget was raised by 1 billion riyals, according to a statement read on state-run television. King Abdullah also ordered the creation of 1,200 jobs in supervision programs and made permanent a 15 percent cost-of-living allowance for government employees, according to the statement.
“They are trying to enlarge the pool of benefits for society given what is happening in the broader Middle East,” John Sfakianakis, chief economist at Banque Saudi Fransi, said in a phone interview from Riyadh.
Saudi Arabia, the world’s largest oil supplier, is spending more on social programs as political unrest roils the region. Governments in Bahrain, Yemen and Libya have cracked down on activists calling for greater job opportunities and political openness after uprisings toppled leaders in Tunisia and Egypt.
Oil rose to its highest in more than two years as unrest threatened to disrupt exports from the Middle East’s main crude producing countries. Crude for April delivery gained as much as 97 cents to $96.39 a barrel in electronic trading on the New York Mercantile Exchange, the highest since Oct. 2, 2008. It was at $95.97 at 1:47 p.m. in London. Futures are up 22 percent from a year ago.
Saudi Arabia’s Tadawul All Share Index fell for the ninth consecutive day, dropping 0.2 percent to 6,263.79 at the 3:30 p.m. close in Riyadh.
King Abdullah returned to Riyadh today after three months abroad for medical treatment, state television said. The 86-year-old monarch traveled to the U.S. in November for treatment of a back injury and went to Morocco on Jan. 22 for physical therapy and to recuperate, the Saudi Press Agency reported.
The king also pardoned some jailed debtors and announced that unemployed Saudis are to get financial aid for up to one year, according to state television.
Saudi Arabia and other Persian Gulf oil producers are spending petrodollars to create jobs and attract investment in contrast to the strained government resources in Egypt, Jordan and Yemen.
“The Gulf oil producers have a lot more money to spend than their other Arab counterparts,” Jarmo Kotilaine, chief economist at Jeddah-based National Commercial Bank, said in a telephone interview. “The political situation is unstable in the world and the region. The government wants to underscore its commitment to the population.”
The Saudi government announced in August a $385 billion, five-year spending plan as the kingdom tries to reduce a jobless rate of about 40 percent for Saudis between the ages of 20 and 24. The overall rate was 10.5 percent in 2009, according to data from the Central Department of Statistics and Information.
Inflation in Saudi Arabia may accelerate in the first quarter as global food prices increase further, the kingdom’s central bank said in a quarterly report on its website. Average inflation in the fourth quarter was 5.7 percent, the central bank said.
Protests in Egypt led to the resignation of President Hosni Mubarak on Feb. 11, less than a month after Tunisian leader Zine El Abidine Ben Ali was forced into exile.
Unrest in Bahrain, which is linked to Saudi Arabia by a 26-kilometer (16-mile) causeway and whose capital, Manama, is only a four-hour-drive from its Saudi counterpart, Riyadh, has in the past spread across the border. In 1995, the Saudi government arrested a large number of Shiite Muslims on suspicion of involvement in protests taking place in Bahrain, according to Human Rights Watch.
Shiites make up between 60 and 70 percent of the Bahraini population and are a significant minority in Saudi Arabia’s Eastern Province, where most of the country’s oil is produced.
In Libya, another member of the Organization of Petroleum Exporting Countries, hundreds of people have been killed in the past week in an uprising against the four-decade rule of Muammar Qaddafi. There have also been demonstrations in Algeria, Jordan, Iraq and Morocco.
Saudi Arabia, the birthplace of Islam, wants to develop its housing and infrastructure as it tries to diversify its economy away from oil. The kingdom produced 8.4 million barrels of oil a day in January, according to Bloomberg data.
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