Saudi panel recommends wage increase as inflation cushion

Riyadh: A committee of Saudi Arabia's advisory Shura Council recommended a national wage increase to cushion employees from inflation, which hit a seven-year high in August, two council members said yesterday.

The committee was set up last month to fashion a response to rising prices. The government of the world's largest oil exporter is not obliged to accept the council's policy recommendations.

"The committee phrased the recommendations carefully: we wanted to make clear that wages for both private and public sectors ought to be raised," one council member, who did not want to be identified, told Reuters.

A second councillor confirmed the information, saying the Shura had held a closed-door session to discuss the committee's recommendations, which included lowering utility tariffs and improving access to housing for people on lower incomes.

"Several members of the council opposed the recommendations of the committee," the second councillor said.

The committee's opponents argued that a 15 per cent public-sector wage increase in 2005 was partly responsible for driving up inflation, he said.

Many private sector employers in the kingdom of 24 million people did not match that increase.

Ihsan Bu-Hulaiga, who heads the Shura Council's finance committee, declined to comment to Reuters on Sunday.

The committee conducted its study with experts from the central bank and the Council of Chambers Commerce and Industry Chambers, the councillors said.

Until this year inflation has rarely been a political issue in Saudi Arabia, unlike in neighbouring Kuwait.

Pressure buildson authorities

Although not binding, the committee's recommendations are a sign of growing pressure on the authorities and the central bank, which is torn between containing inflation and preventing an appreciation of the dollar-pegged riyal currency.

King Abdullah summoned the interior minister and provincial governors to explain inflation after it hit 4.4 per cent in August.