Saudi- Editorial: Budget designed to cope with challenges

(MENAFN- Arab News) The Kingdom has always been prepared to invest wisely. The fruits of those investments are to be seen everywhere. State-of-the-art hospitals schools universities roads and transportation systems are the envy of the world.
Now individuals are being asked to make their own wise investments for a strong and sustainable future. In the coming weeks and months they will be investing in Saudi Arabia's continued prosperity by paying more for their fuel electricity and water. Of course it may not feel like investing. For some who have taken for granted years of negligible outlay on personal transport power and water the price hikes decreed in the new budget may have come as an unpleasant surprise. After all no one likes to pay more for anything.
But the increases are in fact relatively modest. In global terms Saudis and foreign workers still enjoy some of the very lowest prices for fuel power and water. Yet paying more now contributes to stability in the long-term. The new budget is driven by corrective measures. It has been carefully designed to help the Kingdom weather the challenges of lower oil income. Many analysts believe that the current low oil and gas prices will persist for much of 2016. The new spending plans are very far from being emergency measures. This is not some panic austerity budget.
The Kingdom's economic planners have grappled with a range of priorities that are actually designed to avoid future austerity measures. They have also worked to ensure that the impact of the reduced subsidies is softened for the lowest paid.
There are those who argue against subsidies in principle. Free market forces should be allowed to decide the price of everything not least essential goods such as bread and services. Yet every advanced free-market economy has some degree of subsidy. They also use taxation as a way of redistributing cash toward least-advantaged citizens.
From the major hike in oil and gas prices after 1974 the Kingdom saw that it could afford to run a range of subsidies alongside generous health and welfare systems. That principle has not been abandoned. Generous subsidies will continue. It is simply that they have been reduced. Spending SR200 billion a year on energy subsidies is no longer sustainable. As has been pointed out people in Saudi Arabia enjoy considerable advantages. A tank of fuel that costs $100 in the UK can be obtained here for just $10.
Other than budgetary correction the subsidy reductions will also have another important effect. They will cut down on waste. Last year a member of a foreign government delegation to Riyadh wondered why our country bothered with light switches since everywhere he looked at any time of day or night the lights always seemed to be on.
Then there is vexed question of water. In poorer areas where it is still delivered by bowser water is treated with traditional respect. Elsewhere it is not uncommon to see gardens being watered non-stop. Huge quantities of excess water trickle away. And this is generally potable water expensively produced in desalination plants. Worse the bills for this profligate consumption are so low many households do not feel they are worth paying.
Then there is the alarming reality that a quarter of the Kingdom's hydrocarbon production is now gobbled up by domestic demand.
This year's budget therefore goes some way toward heading off any disastrous scenario. Subsidy reductions move consumers toward the real cost of their water fuel and electricity. That will encourage them to control their use of these essentials. Lights and air-conditioning need not be left on all the time. New construction will include water recycling and energy saving measures such as those that are part of Riyadh's new King Abdullah Financial District.
Garden hoses will be put on timers and the water directed carefully where it is needed. Drivers may even decide to downsize when they buy new vehicles. They may go for smaller more fuel-efficient transport.
In years to come this budget will be seen as an economic turning point. It would seem logical that further subsidy reductions will come when the time is right. Those who grumble at increased costs are selfish and wrong-headed. Everyone here in the Kingdom should see the higher prices as their very own investment in the future of the country.