Saudi Arabia plans to slash ministers' salaries by 20 percent

Saudi Arabia will cut ministers' salaries by 20 percent and scale back financial perks for public sector employees in one of the most drastic measures yet by the energy-rich kingdom to save money at a time of low oil prices.

The measures, disclosed in a cabinet statement and royal decree broadcast on state-run Ekhbariya TV on Monday, constitute the first pay cuts for government employees, who make up about two-thirds of working Saudis.

Saudi Arabia’s Tadawul market index tumbled more than 3 per cent in response to the announcement, across all major stocks.

The plunge in oil prices since mid-2014 has pushed energy-rich Gulf Arab states to rein in lavish public spending.

Saudi Arabia racked up a record budget deficit of nearly $100 billion last year, forcing it to find new savings and ways to raise money.

A royal decree read directly after the broadcast on the TV channel announced the cut in ministers' pay. Housing and car allowances for members of the appointed Shura Council will be cut by 15 percent.

Overtime bonuses for public employees were curbed at between 25 and 50 percent of basic salaries, while annual leave may no longer exceed 30 days.

An exception will be made for troops involved in combat along the southern border and abroad as part of an 18-month military intervention led by Saudi Arabia in neighbouring Yemen.

Sign of the times

"It's one more economic measure to balance spending. Of course people don't like it, but it's a sign of the times," Saudi analyst and editor of al-Arab News Jamal Khashoggi said.

"Probably the teachers and many others will be affected by it. It shows why it's important for the private sector and Saudi GDP to diversify," he told Reuters.

Saudi Arabia unveiled a reform plan this year to wean the economy off its addiction to oil, on which the government depends for the overwhelming share of its revenues.

The so-called "Vision 2030" initiative aims to jumpstart the private sector, provide jobs for a growing population and collect more non-oil revenue.

The cuts to public sector perks, effective 1 Oct, are the stiffest in a series of recent measures to boost revenue.

Last month the cabinet approved proposals to raise a range of government fees including visa charges and fines for some traffic violations such as "drifting," or the reckless skidding of cars at high speed - a pastime for some Saudi youth.

It cut subsidies for power and water last December, then sacked the minister responsible following a public outcry over how the new water tariffs were applied.

Deputy Crown Prince Mohammed bin Salman, who is responsible for the sweeping economic reforms, was quoted as saying the water price increases had not been implemented as planned.

Saudi Twitters users responded to the announcement with dismay, many sharing photos of former King Abdullah and recalling past prosperity.

One Twitter user, Rayan al-Shamri, said the move boded ill for the future: "God be with the citizens, we are back to the time of poverty."