Dealing with price increase

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THREE major things happened at the beginning of the year 2018, the introduction of the Value Added Tax (VAT), gasoline prices went up and price of power too was hiked such that the electricity bills were recalibrated in a bid to stem wastage — the more electricity one used the more one paid. Despite the fact that these three measures were announced many months before these prices hikes took effect at the beginning of 2018, the dawning of the New Year with these changes seemed to have still surprised people and there were some overreactions at gas stations and retail stores.

These measures were sweeping in the Saudi economic structure, as they were part of the ongoing reforms in order to ease the pressure on the government, and also to curb what has been described as an over spending on fuel and energy. With regards VAT, Saudi Arabia has just aligned itself with the global economic norms that sees a small levy on the customer that cumulatively enhances business health.

It is human nature to pay less and want more, and no one likes price increase anywhere and in any field. But here, any price increase is always viewed as something adverse, which will reflect later on the family budget, as I will describe later. This by far has affected families with low income who, at the same time, are enrolled in the citizen’s account and are receiving a monthly amount, which is determined based on the salary and the number of family members, to ease the pressure of the utility cost increase.

While these measures are welcome, the rollout of VAT has been misused by some greedy businessmen, who took advantage of the VAT to increase the prices of some goods, while other used the rounding off to the nearest riyal method to milk halalas, some claiming coin shortage while others with no excuse, from buyers. But thanks to social media consumers are now more aware than before. Many of these practices were exposed and these practitioners are facing the threat of boycott of their goods if they did not adjust their prices.

Other businesses bore the VAT charges, and they should be thanked for this initiative. I do not see any problem with the introduction of VAT, as I believe it is healthy and people around the world do pay taxes when buying goods, so it is something normal. The only issue is getting ready to deal with small coins, which was ignored in the past.

The recent increase in prices is a wake-up call for families to organize their finances and cut down on unnecessary spending. We have been accused, as Saudi families, of not planning our finances properly. We spend randomly without a thought about tomorrow. There have been many discussions and reports about the issue of lack of planning and budgeting. Despite the repeated calls to ‘plan and budget’, we rarely listen. But now we can only ignore this call at our own peril.

Prior to this hike, the price of gasoline was way below the global prices, if not the cheapest in the world. Honestly, maybe we were the only country in the world where such a bounty was not used, but abused. For example, if someone was bored, he would fill his tank and roam the streets aimlessly — not only burning money and gasoline but clogging traffic. Others will use their cars to buy bread for one riyal from a store that is 20 meters away from their house.

Such behavior is never seen in America or Europe where fuel prices are high and consumers are more aware on when to use their cars. The only difference is, they have public transportation that serves as an alternative, and we don’t. The funny thing is that a friend of mine is currently trying to convince his wife, a shopping addict, to limit the use of the car because of the gasoline price increase but is noncommittal of the amount spent during shopping!

Families that were careless about electricity are now coming up with tough rules to cope with the new price. Some have set up a rule to gather in the living room instead of each one sitting in their room and consume electricity. Some people have taken the additional step and begun changing to LED light bulbs because they save electricity or replacing their old air-conditioners with new ones that save energy. A friend of mine has come up with another idea of turning his AC down (so it is running less) during sleep hours and as his unit has the “sleep mode” he uses that with a timer.

Every small bit becomes a big effort in the end, as it not only cuts wastage, but enables people to budget their finances wisely. One father has even resorted to the idea of limiting the number of TVs in his house to one TV in the living room, and to force his kids to converge there. The father even pointed out an upside in this move, saying it enabled him to be with his children and see their sibling rivalries while recapturing his role as the ‘benign’ family judge. There are many tips on how to ration spending and deal with the rising cost of living and I suggest that we all start reading them and implementing them in the best possible ways to suit ourselves.

Custodian of the Two Holy Mosques King Salman’s recent generosity of granting government employees SR1,000 to face the rising cost of expenses is a welcome move, but it should not deter the families from moving forward toward cutting unnecessary expenses and to adjust their consuming behavior. The government grant will for sure help a lot the low-income families, who will find it a great difficulty in meeting the rising cost.

Expat families will face the biggest challenge with these price hikes now in addition to the expat fees on families. An expat friend of mine, who was hesitant about separating from his family by sending them back home, has finally decided to do so as have many others. He said that he would for sure save a lot if he lives alone than bear the additional costs.

In a previous article, I wrote, “We need to strengthen the concept of saving and avoid lavish spending. Planning our expenses is what is needed most. Is it difficult to identify the areas of expenses and set aside the amount to tide out the month by living frugally with the remainder — if people start small and plan to save then many would be able to live a debt-free lives.”

— The writer can be reached at mahmad@saudigazette.com.sa Twitter: @anajeddawi_eng


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