Saudi Arabia Reverses Salary Cuts After Succession Shakeup

  • Cutbacks had been designed to help balance Saudi budget
  • Austerity measures had deepened oil-related economic slowdown

Saudi Arabia's Shake-Up

Saudi Arabia’s King Salman has reversed a decision to cut salaries and benefits for public sector employees, a move that’s likely to fend off any social discontent but could complicate his new successor’s plan to repair the kingdom’s finances.

In a series of announcements that also promoted his son, Mohammed Bin Salman, to heir to the throne, the Saudi ruler restored all allowances and bonuses canceled or suspended last year, the official Saudi Press Agency reported on Wednesday. Payments to the civil servants and military personnel will be backdated to September, when the austerity measures were first announced.

The decree said the measures were taken to “ensure the comfort of our Saudi sons and daughters” and “provide them with generous living standards.” The country will also have a two-week holiday to celebrate the end of Ramadan, a Saudi official told Bloomberg.

The bonus cutbacks were part of an ambitious plan led by the new crown prince to overhaul Saudi Arabia’s oil-dependent economy in an age of depressed energy prices. They were designed to reduce the public-sector wage bill to 40 percent of spending by 2020, from 45 percent at present. Riyadh-based Jadwa Investment said in February that they could have saved 185 billion riyals ($49 billion) through to 2020.

But the austerity measures, combined with the drop in oil prices that prompted them, caused the kingdom’s worst economic slowdown since the global financial crisis. Many citizens had groused privately and on social media about their reduced incomes. The government had already started to roll them back in May, restoring some of the largess that has guaranteed the loyalty of citizens to the absolute monarchy of the Saud family.

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