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Saudi King Salman Showers Citizens with $32 Billion Despite Predicted Budget Deficit

The new monarch’s post-coronation handout is a winner with locals, but experts say falling oil prices will make such lavish spending unsustainable.
Photo via Saudi Press Agency/AP

The newly crowned monarch of oil-rich Saudi Arabia, Salman bin Abdulaziz Al Saud, who acceded to the throne last month following the death of his brother, King Abdullah, has given billions of dollars on his citizens in an extravagant celebration of his coronation.

The massive handout, estimated to total more than $32 billion, includes a two-month basic stipend for all state employees, soldiers, students, and pensioners, as well as generous grants to various professional associations, and literary and sports clubs.


"Dear people: You deserve more and whatever I do will not be able to give you what you deserve," read a tweet from King Salman's official twitter account after the generous giveaway was announced.

In a country where 3 million of the nearly 5.5 million-strong work force is employed by the government, the handout will directly benefit nearly every echelon of society. Several private companies have also reportedly followed suit, matching the king's generosity with bonuses for employees.

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Many Saudis have celebrated the move by splashing out on luxury items such as jewelry, iPads, flat screen televisions, and vacations. One man even expressed his happiness at the handout by posting a video to YouTube in which he showers his bemused-looking infant with crisp Saudi riyal bills.

This is not the first time a Saudi monarch has splashed cash at citizens. In the conservative Gulf country, social obedience and loyalty to the king is tightly tied to the state's ability to provide decent standards of living and public services, say experts.

This tradition of handouts in exchange for allegiance dates from a time when a tribal sheikh would have to prove they were the wisest, bravest and most generous in order to rule, Trevor McFarlane, founder of Dubai-based Emerging Markets Intelligence and Research, told VICE News.


Today, despite the hereditary claims on power now enjoyed by the Saudi monarchy, the custom has become so ingrained that when a new king comes to power, a "display of generosity is crucial to buttressing the loyalty of locals," McFarlane said.

"Although it may seem bizarre to Western policy makers, Gulf monarchies are government-led economies and the social contract dictates such bonuses as not just necessary, but almost expected from some quarters of society," he added.

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Gifts from the monarch can also be used as a buttress in times of political turbulence. In 2011, King Abdullah poured $35 billion into a social development fund that helped Saudis finance marriages, start business and buy homes. The giveaway coincided with the monarch's return from a three-month trip to Morocco for medical treatment, and was widely seen as a bid to shore up support in the face of the Arab Spring and unrest in neighboring Bahrain.

But while the Saudis happily head out on shopping sprees to spend their gifts, economic experts are warning that falling global oil prices may render the Saudi tradition unsustainable in the long-term. About 90 percent of the Saudi government's income comes from oil.

Although the country is sitting on at least $700 billion in savings gleaned from high oil barrel prices over recent years, the latest handout comes at a time when the country's credit rating is being downgraded and its population is growing rapidly.


"An extension and indeed ramping up of pre-2011 wealth distribution strategies at a time when the kingdom is entering into steep deficit territory… does not protect the long-term interest of citizens," Chris Davidson, a Middle East academic and author of After the Sheikhs told VICE News.

Davidson added that the oil industry is currently reshaping itself in a way that will likely prevent crude oil exporters such as Saudi from ever commanding the high barrel prices once enjoyed.

This year, the government's budget deficit is predicted to run as high as $39 billion — equivalent to six percent of gross domestic product — according to Jadwa Investment, a Riyadh-based closed joint stock company.

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Follow Harriet Salem on Twitter: @HarrietSalem