Saudi Arabia will increase electricity tariffs by 5% to 17% and water bills two- to threefold from January 2027, as part of long-planned economic reforms. The state-owned utilities announced the hikes on Sunday, affecting most households and businesses. Citizens have long benefited from heavily subsidised utilities, but the government has been gradually reducing these subsidies over the past decade under Crown Prince Mohammed bin Salman’s Vision 2030 reforms.
In response, King Salman ordered a package of measures to cushion the impact, including monthly allowances of 500 Saudi riyals ($133) for civil servants, military personnel, retirees, and eligible households. The minimum wage for private-sector Saudi workers will rise from 4,000 to 5,000 riyals by mid-2027, then to 6,000 riyals by mid-2028. The IMF has long urged Saudi Arabia to reform its subsidy system, calling it distortionary and wasteful.
Officials argue that redirecting subsidies will improve efficiency and encourage responsible consumption, while cash transfers will support low-income families. However, the timing is sensitive: the economy is already under strain from regional conflict, with GDP projected to decline 3.6% this year. Inflation has risen slightly to 1.84%, and economists warn the utility hikes could push prices higher, though the new support measures may help offset the impact.
Meanwhile, Houthi attacks have forced the closure of King Khalid International Airport, disrupting events including the kingdom’s flagship economic conference. Oil exports have also been affected by disruptions in the Bab al-Mandeb Strait. Defence Minister Prince Khalid bin Salman travelled to Tehran for talks with Iran, Pakistan, and Turkey to de-escalate tensions.
Source: Financial Times Companies · Summarized by HeadlinesBriefing