In less than a week after Custodian of the Two Holy Mosques King Salman’s enthronement, some 30 royal decrees were issued, from ministerial post changes to extra salary hand outs and additional infrastructure spending.

We estimate the total cost of the extra spending amounts to $32.3 billion of which 80 percent is current spending and another $5.3 billion is capital expenditure over several years. The measures comprise 4.4 percent of our estimated 2015 GDP of $732 billion.

The majority of the measures are consumption-driven and would have a direct one-off impact. The payments are expected to be made over the course of the next four weeks. Such measures are not atypical at the outset of a new king’s tenure. They are always positively received by society as a gesture of goodwill.

Three weeks after King Abdullah ascended to the throne (in August 2005) a 15 percent salary increase for public sector employees was announced. Basic salaries at that time had not increased for quite some time. Just like in previous times, the private sector reacted to such measures and many have instituted basic salary increases or parallel monthly basic salary hand outs.

This will have an impact for more than two million private sector Saudi employees as well as many expatriates. Caps have been placed as private sector wages are many times over public sector salaries. We estimate the total effect to add 0.78 percent to real GDP.

The measures included payment of two months of additional basic salary or similar rewards to a wider range of state and military employees, retired government and private sector workers, public sector students (in Saudi or abroad) and social security beneficiaries. There were also grants to professional associations and sports and literary clubs around the country and SR20 billion in spending to improve electricity (SR14 billion) and water services (SR6 billion).

On the fiscal side, these measures can be sustained given Saudi Arabia’s reserve position. The government’s current account with SAMA (Saudi Arabian Monetary Agency) has declined by $32.6 billion between September-December 2014. Although our view is that oil prices will pick up later this year, even at $50 per barrel, coupled with elevated spending would lead to a manageable decline in reserve assets.

On the cabinet front, the institutional changes announced which are geared to increase efficiency and effectiveness are of particular importance. The Ministry of Higher Education and Ministry of Education were merged into one super ministry. In total, 12 committees and councils were abolished.

We expect that additional initiatives could be announced as well as additional projects that have a positive trickledown effect for the larger economy.

— John Sfakianakis is Middle East Director at Ashmore Group.