Saudi Arabia, UAE boost spending to shield citizens from inflation

Saudi Arabia and the United Arab Emirates are boosting state spending on social welfare by billions of dollars as they seek to shield their citizens from rising living costs.

The UAE is doubling the financial support it provides to low-income Emirati families to 28 billion dirhams ($7.6 billion) to help them with soaring inflation in the Gulf state, while Saudi Arabia's King Salman ordered a 20 billion riyal ($5.33 billion) allocation.

The kingdom will reopen registration for the programme known as Citizens Account and allocate 8 billion riyals in additional funding for it through the end of the year.

Another 2 billion riyals will go to one-off payments to social insurance beneficiaries and 408 million riyals to a programme that supports small livestock breeders.

The UAE's expanded budget allocation, reported by state news agency WAM on Monday, includes increasing existing benefits and establishing new ones targeted at mitigating the impact of inflation on food prices, and rising fuel and household energy costs.

Some of the new benefits for Emiratis include financial support for university students and the unemployed who are over 45 years old.

It was not immediately clear how the expansion of financial support would be funded by either Saudi Arabia or the UAE, both major oil producers who have seen a huge windfall this year from high crude prices.

James Swanston of Capital Economics said the spending boosts were equivalent to 0.6% of Saudi Arabia's GDP and 1.8% of the UAE's GDP.

"Admittedly, headline inflation in both countries has not increased as quickly as other parts of the world, but it has nonetheless risen," he said.

"Given the size of the increase in spending the overall impact on public finances will be relatively small and we anticipate that both countries will still run large budget surpluses this year."

Saudis make up nearly two-thirds of the kingdom's roughly 34 million population. The disparity in wealth among citizens is generally far wider in Saudi Arabia than in the UAE, with Saudi citizens working some blue-collar jobs.

Emiratis account for about 10% of the UAE's population of roughly 10 million people, who are mostly foreign workers and dependents.

A large number of those are low-paid blue collar workers who are practically all foreigners, meaning that they will not directly benefit from the expansion of benefits.

Those living in the UAE, including citizens and foreigners, have in recent months voiced concerns over rising living costs, with retail fuel prices alone up around 80% so far this year.

Earlier this year, low-paid foreign delivery drivers working in the UAE launched rare strike action over pay conditions, citing higher fuel prices.

($1 = 3.6727 UAE dirham)

($1 = 3.7527 riyals)