RIYADH, 9 December 2007 — Saudi Arabia yesterday announced plans to subsidize sales of rice in the country at the rate of SR1,000 per ton. The subsidy for baby milk will go from SR2 to SR12 per kilogram as part of efforts to reduce the financial burden on public caused by soaring consumer prices.
Custodian of the Two Holy Mosques King Abdullah has already given orders to the Ministry of Finance to subsidize the two essential commodities. “The king has also instructed the ministerial committee for supplies to follow up implementation of his orders,” Finance Minister Dr. Ibrahim Al-Assaf said.
The royal move came two days before the announcement of the general budget for 2008, which is expected to be announced during the Cabinet meeting tomorrow. Informed sources said the Supreme Economic Council, which met on Wednesday, reviewed the budget proposals. The budget is expected to allocate additional money to health and education. Since coming to the throne in August 2005, King Abdullah has made several decisions for the welfare of Saudis and expatriates. He increased the salaries of government employees by 15 percent and cut fuel prices by 30 percent. He ordered the release of thousands of prisoners, including expatriates, who had been jailed for petty crimes.
The announcement made both Saudis and expatriates happy and they expect the government to take further steps to reduce the additional burden caused by increasing prices of essential commodities.
“This is a very good news for all people in the Kingdom,” Mohammed Shaker Al-Dahlawi, director of compensation at the Ministry of Transport, told Arab News. He said rice prices in the Kingdom had risen by 30 percent during the last three months while that the price of baby milk had increased by more than 50 percent during the last 10 years. Al-Dahlawi expects more action from the government as the price hike has hit all essential commodities in the country.
He also urged the Ministry of Commerce and Industry to keep an eye on businessmen who hike prices without any reason. “I request the government to subsidize prices of medicines, especially those used by patients suffering from diabetes or blood pressure,” Al-Dahlawi said. The Health Ministry has taken some measures recently to cut down medicine prices.
Al-Arabiya satellite channel reported on Friday that government employees would soon receive a 30 percent pay hike but there was no official confirmation. The Shoura Council is expected to invite Finance Minister Al-Assaf to discuss the salary hike for public employees and other important issues.
The king’s decision to subsidize rice and baby milk fits well with the proposals of some economists who believe that the government should subsidize essential commodities in order to offset the effect of rising prices and inflation rather than increase salaries.
They think pay hikes will further push consumer prices to unpredictable levels. Inflation rates in the Kingdom reached a record 4.89 percent in September 2007, pushing prices up by 20 percent.
“The rise in prices, which has affected all groups in society, demands government support in the form of subsidizing imported essential commodities such as rice and sugar,” said Economist Salim Baajajah.
“This is a better solution than price hikes,” he added. Baajajah also called upon the government to cut all service charges, including those for electricity and telecom services.
“The government should also fix real estate prices and house rents as they have gone up record levels,” the economist said. He stressed the need for setting up effective organizations for the protection of consumers.
“It would have been better if retail traders had formed such groups in order to prevent importers and producers from hiking prices without any reason,” he added.
Dr. Mansour Al-Kredes, deputy chairman of the agricultural committee at the Riyadh Chamber of Commerce and Industry, proposed the government subsidize agricultural and food products in order to stabilize the market. “We should have a strategic plan in order to ensure enough food supply, by providing necessary support to farmers,” he explained. “Subsidizing consumer goods will have a positive impact on farmers and will stabilize market prices,” he pointed out.
Most Saudis believe that the Saudi riyal’s peg to the tumbling US dollar is the main reason for the current hike in prices in the Kingdom and other Gulf countries.
