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Wed 20 Feb 2008 02:08 AM

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Saudi to hike wages through allowances

Public sector salaries and pensions to rise incrementally over next three years, news agency confirms.

Saudi Arabia said on Tuesday it would distribute a public sector wage increase announced last month through cost of living allowances rising incrementally over three years, the state news agency said on Tuesday.

Wages and pensions of state employees would rise 5% per year for the next three years, the Saudi government said on January 28 as part of measures designed to help its 25 million people cope with rising inflation.

The move would result in an overall 15.76% increase in the kingdom’s public wage bill, costing $16 billion by the end of 2010, the finance minister said.

Public sector institutions would give employees an allowance of 5% of their basic salary in the first year, 10% in the second year and 15% in the third year, Saudi Press Agency reported on Tuesday, clarifying the January 28 decision.

Inflation in the largest Arab economy hit a 16-year peak of 6.5% in December.

Saudi Arabia, the world's largest oil exporter, is constrained in its fight against inflation by its riyal currency's peg to the dollar, which forces it to track US interest rate cuts despite price rises.

The kingdom would not change foreign exchange policy for now, a member of the Shura Council, a body that advises the king, said on Sunday after a meeting with the finance minister and central bank governor to discuss how to combat inflation.

Saudi Arabia has tried to offset the impact of price rises through measures that include welfare payments, subsidies and tighter bank lending restrictions.

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