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GCC Countries Face High Prices With Muscular Support for Citizens

GCC Countries Face High Prices With Muscular Support for Citizens

The six Gulf allies depend on imports to meet basic food needs

Gulf states are raising subsidies provided to citizens in the face of the sharp rise in prices attributed to the Russo-Ukrainian War.

Kuwait was the first Gulf Cooperation Council (GCC) country to extend additional financial support to retirees, giving each pensioner 3,000 Kuwaiti dinars (about $9,700). This benefits 160,000 retirees, 17% of the nation’s citizens.

United Arab Emirates President Mohamed bin Zayed Al Nahyan issued a directive to raise subsidies by 28 billion dirhams ($7.6 billion), which was distributed to several categories of beneficiaries.

Beneficiaries include every family whose monthly income is less than 25,000 dirhams ($6,800), retirees, students, and the unemployed, in addition to funding an allowance for fuel, electricity, and other expenses.

The cost of fuel in the UAE has reached about $1.50 per liter ($5.68 per gallon) for the first time, the highest price in the six GCC member countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE).

Saudi King Salman bin Abdulaziz issued a royal order allocating financial support of 20 billion riyals ($5.33 billion) to face the repercussions of rising prices. It benefits more than 10 million citizens registered in the “Citizen Account” support program, in a country of 34.8 million people, of whom approximately 70% are citizens.

In Bahrain, King Hamad bin Isa Al Khalifa ordered the disbursement of an additional month of support allowances for families with limited income, the value of which ranges from 55 to 220 Bahraini dinars ($150 to $580) according to the salary level. This benefits 127,000 Bahraini families in a population of 1.5 million, of whom 700,000 are citizens.

According to World Bank figures, Kuwait has the highest inflation of the GCC countries at 5.5%, followed by the Sultanate of Oman, then the UAE, Bahrain, and Qatar, with Saudi Arabia having the lowest rate, 2.5% annually as of May.

While the GCC states benefit from high oil and gas prices, they are dependent on ever more expensive imports for between 50% and 90% of their basic foodstuffs, depending on the country.

The GCC countries, which peg their currencies to the US dollar, or in the case of Kuwait to a basket of currencies dominated by the US dollar, were forced to raise their basic interest rates after the US Federal Reserve raised its, and they are trying to strike a balance between reducing inflation and reviving markets after the pandemic.

Qatar has the highest average government and private sector salaries, while Bahrain and Oman are at the bottom of the list among the GCC countries, reaching about 700 Bahraini dinars or Omani riyals (about $1,850) per month.

Salman al-Khalidi, a Saudi economic analyst, told The Media Line, “The financial support ordered by the king is directly benefiting low-income families, and helps them face the recent wave of high prices.

“The Gulf countries have restructured the support provided to citizens, and it is now provided directly to people with limited income, instead of the previous method of support that included everyone, so increasing the support will not be a burden on the state,” he added.

“The current wave of high prices is temporary, and it is due to what the world is witnessing from the shortages in supply, the Ukrainian war, the shipping crisis, and other factors. At the same time, it is not possible to demand from the private sector, which is the largest employer of citizens, to bear the burden of the high prices,” Khalidi said.

Citizens of four Gulf countries in particular rejoiced after the decisions to increase support, especially since it was provided in time for Eid al-Adha (The Feast of the Sacrifice, which just ended). The citizens of Oman are waiting for a similar step, and Qatar is unlikely to take such measures, given the high incomes of its citizens and the existence of previously instituted large support packages.

Ahmed Abdullah, an Emirati journalist specializing in economic affairs, told The Media Line, “This support is extended to face high prices. We are in a country where 80% of the population is foreign, and it is not possible to reduce gasoline or electricity prices to include everyone, so a balance between the two options is required.”

Omar Jahmani, a Bahraini professor of economics, told The Media Line, “Bahrain, after restructuring the subsidy, was able to provide more for people with medium and limited incomes.”

“There is a noticeable increase in prices of more than 30%, in addition to the fact that last June was the last month to defer the repayment of loans to citizens in Bahrain, a deferment which lasted for more than two years during the pandemic, which means that the return of deductions, in addition to the increase in prices, will constitute a burden on the citizen,” he continued.

“In general, the state supports several sectors. There is a subsidy for the citizen’s electricity in his home, and gasoline prices have not risen much, and there is a meat allowance, and another for the high prices in general. Bahrainis will withstand this wave of high prices,” Jahmani said.

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