Riyadh/Dubai: Saudi Arabia will start a cash-payment programme to compensate all but the wealthiest for cuts in universal subsidies as the kingdom pursues an unprecedented plan to overhaul its economy, according to two people familiar with the matter.

The government will provide cash subsidies to low- and middle-income families, the people said. Registration for the programme will open February 1 and payments will start in June next year, they said, asking not to be identified because they are not authorised to release the details.

Government officials weren’t immediately available for comment.

The Saudi government will announce its state budget for 2017 on Thursday, according to the finance ministry’s official Twitter account. The announcement will show progress on the kingdom’s efforts to reduce a budget deficit that surged to 15 per cent of economic output last year.

 

Boost spending

The 2017 budget will boost spending to support economic growth while raising domestic energy prices to ease the government’s subsidy burden, sources told Reuters.

The government is expected to announce its budget deficit fell sharply this year to 297 billion riyals (Dh290 billion; $79.2 billion), the sources, who are familiar with the budget planning, said on Wednesday.

That would allow Riyadh to claim substantial success in its battle to reduce a huge deficit caused by low oil prices. The deficit totalled a record 367 billion riyals in 2015, and the original budget for this year projected a 326 billion riyal gap.

The finance ministry did not respond to a request for comment on Wednesday. The sources said the numbers which they quoted were not final and could still be modified, but that they did not expect any major changes.

Government revenues totalled 528 billion riyals in 2016, slightly higher than the 514 billion originally projected, while spending was 825 billion riyals, slightly lower than the 840 billion in the original plan.

The 2017 budget plan sets spending of 890 billion riyals, 6 per cent higher than the original projection for spending in 2016. Revenues next year are projected at 651 billion riyals, up from 514 billion.

The higher spending would permit gross domestic product growth to accelerate to 2.0 per cent in 2017 from an estimated 1.7 per cent this year, the sources said.

The 2017 spending and revenue numbers imply Saudi Arabia would reduce its deficit further next year to 239 billion riyals. The government has said it aims to eliminate the deficit by 2020.