December 14, 2017 / 7:42 AM / 6 months ago

Saudi king approves $19 billion of economic stimulus steps

RIYADH (Reuters) - Saudi Arabia’s King Salman approved 72 billion riyals ($19.2 billion) worth of measures to stimulate growth in the private sector as authorities seek to pull the economy out of a slump caused by low oil prices.

Saudi Arabia's King Salman bin Abdulaziz Al Saud presides over a cabinet meeting in Riyadh, Saudi Arabia, December 5, 2017. Saudi Press Agency/Handout via REUTERS

The measures include residential housing loans worth 21.3 billion riyals, a 10 billion riyal fund to support economic projects, and 1.5 billion riyals to support distressed companies, the government announced on Thursday.

A 2.8 billion riyal government fund will be created to invest in smaller companies, while the government will adjust the fees which it charges for services to save smaller companies 7 billion riyals.

More money would be spent on projects such as developing the kingdom’s broadband infrastructure and promoting advanced construction techniques. Officials did not give details of most of the stimulus measures.

The private sector’s growth has slowed to a crawl this year because of government austerity policies designed to curb a state budget deficit caused by low oil export revenues.

The economy faces more headwinds early next year in the form of the planned introduction of a 5 percent value-added tax in January and domestic energy price hikes. With unemployment among Saudis officially put at 12.8 percent, authorities are eager to prevent the private sector from slipping into recession.

Fahad al-Sukait, a cabinet adviser who briefed reporters on the stimulus plan, said the measures outlined on Thursday were part of a four-year, 200 billion riyal scheme to aid private businesses.

Of that amount, 40 billion riyals was allocated this year in the form of capital increases for state funds which support the economy by lending in areas such as housing.

The 72 billion riyals will be spent over the next four years, including 24 billion riyals in 2018, Sukait said. Officials are still drawing up plans to spend the remaining 88 billion riyals of the scheme, he added.

Additional reporting by Reem Shamseddine and Hadeel Al Sayegh; Writing by Andrew Torchia

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