500 Riyals for a Lower Bill: Saudi Arabia Precedes 2027 Budget with a Support Package of Unannounced Cost

On September 30, the Saudi Ministry of Finance estimated the 2027 budget deficit at around 191 billion riyals. Twenty-five days later, a royal directive was issued adding a monthly commitment of 500 riyals for every civil and military employee, retiree, and social security household, coinciding with the increase in electricity and water tariffs starting in January. As of this writing, neither the cost of the commitment, its duration, nor its source of funding has been announced.

What was decided?

The allowance covers four categories: civil and military employees on civil service pay scales and operational program provisions, retirees, beneficiaries of deceased subscribers, and social security families. Its disbursement to retirees will begin automatically on January 1, 2027. For Saudi workers in the private sector, there is another measure: the wage threshold at which a worker is counted fully toward Saudization rates increases from 4,000 riyals, according to specialized guides, to 5,000 six months after the measure begins, and then to 6,000 twelve months after the first increase is applied. Headlines describing this as a minimum wage hike are inaccurate, as there is no general legal minimum wage for Saudis in the private sector.

The official text links the monthly support to "contributing to mitigating the impact resulting from adjusting electricity and water tariffs," including the measure specific to private-sector employees.

The two tariffs begin together in January. The residential electricity tariff is 21 halalas per kilowatt-hour up to 6,000, and 33 halalas above that, compared to 18 and 30 since 2018. A fixed fee starting at 70 riyals per month for circuit breakers from 20 to less than 100 amperes replaces the meter reading and billing fee. The commercial tariff is 25 halalas up to 6,000 and 35 above it, while the industrial tariff is 23. For water, there are four residential brackets for the combined total of water and sanitation: 1.5 riyals per cubic meter up to 15 meters, 3 up to 30, 6 up to 45, and 9 above that. A fixed fee of 20 riyals for water and 10 for sanitation for meters up to 20 mm replaces the meter fee. The tables do not include value-added tax.

500 riyals per month for employees, retirees, and social security beneficiaries along with the new electricity and water tariffs.. Here is what changes in your home bill starting from 2027

What the numbers say about the family

Take a household consuming 3,000 kWh and 30 cubic meters per month—an illustrative assumption rather than an official average. Its bill rises by 90 riyals for electricity, which is 3 halalas per kWh, and around 43 riyals for water due to moving between the first and second tiers. Added to this is the net of the two fixed fees: 100 new riyals (70 for electricity and 30 for water) minus the two old meter fees whose values were not announced. If they were between zero and 20 riyals, the increase ranges between 213 and 233 riyals before tax, and between 245 and 268 after.

The allowance is 500 riyals for each covered individual, which is nearly double this increase. If the household includes both an employee and a retiree, the amount is 1,000. The threshold where the increase equals the allowance approaches 10,000 kWh per month based on the same figures, an approximate estimate that fluctuates with the breaker size and old fees. That is, the package is closer to income support than to bill compensation.

A cost without a figure

Three million beneficiaries—an assumption, not an official estimate—means 18 billion riyals annually, a figure that appears limited in a budget with expenditures of 1.392 trillion. The figure has a historical reference: when the cost-of-living allowance was suspended in 2020, the number of affected individuals was estimated at about 1.5 million government employees; a 500-riyal allowance for them alone equals 9 billion riyals annually, before retirees and social security families.

The September 30 statement estimated revenues at 1.202 trillion and expenditures at 1.392 trillion, with a deficit of 3.6% of GDP, after the ministry raised the 2026 deficit to 245 billion riyals (4.9%) compared to 165 in the original budget. The ministry expects real GDP to contract by 3.6% in 2026, with oil activity declining about 21.8% and non-oil growth at 3.2%. This growth for the full year requires, as official figures show, that the first half did not exceed 1.8%, meaning the second half must accelerate to nearly 4.6%, assuming equal weight for both halves—a simplification that eases seasonal weights.

The announced plan is borrowing. The Minister of Finance stated that the 2027 deficit will be covered by domestic and international borrowing, and that the detailed plan will be announced before the end of the year. The 2026 plan had estimated the requirement at 217 billion riyals—a 165 deficit and 52 in debt maturities. With the adjusted deficit, the requirement approaches 297 billion if maturities remain unchanged. The statement itself is based, as the Arab Gulf States Institute in Washington notes, on a 3% nominal spending cut without detailing where it applies. It was not clear from published announcements whether the package is inside or outside the 191 billion.

Fitch maintained the rating at A+ and projected a deficit of 4.7% of GDP in 2027 compared to 3.6% by the ministry. The difference is 1.1 percentage points, or about 58 billion riyals on a nominal GDP of nearly 5.3 trillion (191 divided by 0.036). It measures the size of the discrepancy between two estimates pre-dating the package, and adds nothing to it. If the allowance is a permanent commitment, then 18 billion riyals ($4.8 billion) is equivalent to about $2 per barrel when exporting 6 million barrels per day—purely an illustrative assumption, as the equation tightens if exported quantities are lower.

Then comes the missing figure. The two utility companies do not publish the value of government support for the tariff difference, so it is impossible to say how much raising prices saves the Treasury. If this support decreases by as much as bills increase, part of the allowance is funded by the savings itself, making the net cost lower than the gross. However, the value of this reduction remains unknown.

Who bears it and who is excluded

Expatriates, numbering around 13.4 million according to the 2022 census, pay the new tariff in full without an allowance. A Saudi in the private sector does not receive a cash allowance, and their benefit depends on their enterprise's compliance with the threshold. High-consumption users bear whatever exceeds the allowance. The lump sum does not distinguish between consumption levels: it compensates small families by more than their bills, and falls short of the needs of large families. Its proportion to income varies: 12.5% for a retiree with a salary of 4,000, and 2.5% for an employee with a salary of 20,000.

Companies and the calculation wage

Raising the threshold from 4,000 to 6,000 riyals means an extra 24,000 riyals annually per worker, before social insurance and end-of-service benefits. An enterprise with one hundred Saudis at the current limit faces an additional 2.4 million riyals annually if it wants them to remain fully counted. The start date of the measure is unspecified: if calculated from January 1, the two phases will be in July 2027 and July 2028; if calculated from the date of the directive, they will be in April 2027 and April 2028. The enterprise faces options: raise wages, accept a lower rating and its consequences, reduce lower-level jobs for Saudis, or automate. This cost accompanies the adjustment of commercial and industrial electricity tariffs. The number of Saudis in the private sector earning below 5,000 or 6,000 is unknown, which is the metric by which the shock is measured.

The 2018 precedent

This is not the first time. On January 6, 2018, after gasoline price hikes and the introduction of value-added tax, King Salman bin Abdulaziz ordered a monthly allowance of 1,000 riyals for state employees for one year. It was renewed in December 2018 for another fiscal year pending the completion of a social protection study, then suspended starting June 2020 along with raising VAT from 5% to 15%, with the Minister of Finance describing it as temporary. Thus, the temporary allowance lasted more than two and a half years. The current directive's published texts mention no duration for it. A comparison reveals differences: the 2018 allowance came five days after price hikes, whereas today's allowance came 68 days before, is half its value, and was issued outside the December budget cycle. Therefore, it cannot be described as seasonal, nor as the first.

Cairo: Target, not schedule

At the conclusion of "Egypt Forum 2026," Prime Minister Moustafa Madbouly announced, in the presence of President El-Sisi, a target to raise the minimum wage from 8,000 to 15,000 pounds by fiscal year 2029/2030, an 87.5% increase, benefitting at least 4.5 million state employees. It is a target rather than an executive decision, as no final implementation date was set, and it will take place through gradual increases. With three equal annual increases (July 2027, 2028, and 2029), each would amount to around 23%—this is arithmetical calculation, not an announcement.

Its real value depends on inflation, which reached 13.9% in urban areas in September and 12.8% nationwide. If the urban rate remains at 13.9% for four years, the minimum wage needs only 13,464 pounds to maintain its current purchasing power, so the target implies a real gain of about 11%. This is a scenario, not a forecast. The pound itself is moving: the dollar rose from 49.43 on June 29 to 54.02 on October 20, up 9.3%. At the latter rate, 15,000 pounds equals about $278, and 6,000 riyals equals about $1,600, or about 5.8 times as much. The comparison is nominal between two different markets.

Annual inflation rate in Egypt declines to 13.9% in September

The two tools differ in who bears the cost: Saudi Arabia pays a fixed allowance from the Treasury now and shifts part of the wage cost to companies later via "Nitaqat." Egypt places the cost on the budget and postpones it to 2030. The financial constraint differs: a Saudi A+ rating and large reserves, versus an Egyptian B rating with a stable outlook from S&P and an IMF program involving subsidy reforms that may include fuel and electricity. The housing, water, electricity, gas, and fuel group rose 29.6% year-on-year.

What must be announced before January

Before January, five questions need an answer: the package's cost and whether it is inside the 191 billion, the value of utility subsidies and the impact of the hike on them, the allowance's duration, the start date of "Nitaqat," and the number of Saudis in the private sector below 5,000 and 6,000. After January, four figures will be monitored: the first actual bill, retail sales, inflation, and utilities' subsidy disclosures. The Saudi index closed on the announcement day at 9,438.50 points, losing 2.65%, and a single session is not enough to judge the reaction.

The allowance begins in January, the bill begins in January, and the figure explaining the relationship between them has not yet been published.