FILE - In this file photo provided by the Saudi Press Agency, King Salman attends a swearing-in ceremony in Riyadh, Saudi Arabia. Saudi King Salman has delivered an annual speech outlining his government's priorities for the coming year. (Saudi Press Agency, via AP, File)
LONDON - Saudi authorities said they would spend billions of riyals to help citizens offset the impact of VAT and a surge in gasoline and utility prices, a move that would help ease public discontent while highlighting the kingdom’s struggle to overhaul its economy.

King Salman, in a series of royal orders on Saturday, restored an annual pay raise for Saudi civil servants, suspended as part of attempts to rein in a hefty public-sector wage bill.

He ordered a 5000-riyal (R16 400) bonus for soldiers fighting in Yemen and granted Saudis working for the state an extra 1000 riyals a month as a “cost of living” allowance for a year. The government will also pay part of the newly introduced VAT. The measures will likely be cheered by Saudis who took to social media and television to criticise surging prices and the implementation of a 5% VAT on a wide array of products as of January 1.

Yet they also show how the kingdom’s rulers are struggling to find a balance between the need to avoid unrest and take the difficult steps needed to reduce what policy makers and economists see as an unsustainable reliance on oil revenue.

“The main story from what has happened is not the deterioration to the budget, it’s not the marginal uptick in consumption that’s going to result from the handouts, but it’s just the fact that this is a government that is very careful about implementing any measures that might be perceived as painful for the Saudi households,” Jean-Paul Pigat, Dubai-based head of research at Lighthouse Research, said.

Explain reasons

Finance Minister Mohammed Al-Jadaan, appearing on state television to explain the reasons behind the price increases, struggled to keep up with repeated questions over the impact on citizens.

Discontent wasn’t limited to average Saudis. Security services on Thursday arrested 11 princes after they staged a palace protest in the capital Riyadh over the non-payment of their electricity and water bills, the attorney-general said.