STEVE INSKEEP, host:
Some of the pressure on the world economy comes through the high price of oil, so you would think this would be a good time to live in an oil-rich country - not true of Saudi Arabia right now. The price of food is rising in Saudi Arabia and so is discontent. In this absolute monarchy, people have started circulating text messages on mobile phones urging boycotts of milk. Not only that, the inflation has some economists calling on Saudi Arabia to revalue its currency or even delink it from the slumping U.S. dollar.
And we have more this morning from NPR's Peter Kenyon.
PETER KENYON: From the outside, Saudi Arabia looks like a country awash in petrodollars, without an economic care in the world. But here at the Panda Supermarket, in a middle class neighborhood of Riyadh, ordinary Saudis are finding their budget strained to the breaking point by inflation that soared to a 16-year high last month.
Rice, a nearly ubiquitous ingredient at mealtime that used to cost a little more than $7 per 22-pound sack, now goes for nearly $17. Cans of powdered milk have more than doubled in price, and shoppers like Abu Faisal(ph) say the economic pain is getting severe.
Mr. ABU FAISAL: (Through translator) I've got eight kids. I can't pay these prices. It's really too much. The government should subsidize these common foods and they should be really vigilant to hold the greed of the merchants in check. They should pay attention because hunger can make somebody a time bomb.
KENYON: At 6.5 percent last month, the official Saudi inflation rate is lower than in other Gulf states, but this is a country where zero to one percent inflation was the norm for two decades. And the price rises are only reminding Saudis that the kingdom's vast oil wealth is hugely concentrated among the royal family and a small upper class.
Some visitors are shocked to find the vast majority of Saudis struggling to make ends meet, even as oil hits the $100 a barrel mark. Businessman and analyst Yussein Eliracis(ph) says there are a number of factors involved in the rise in prices, but one that's getting a lot of attention lately is the fact that the Saudi riyal is pegged to the weak U.S. dollar. Eliracis says the Saudi relationship with the U.S. remains as strategically important as ever, but for Saudis that relationship is getting very expensive.
Mr. JUSSEIN ELIRACIS (Businessman): First of all, it's the exchange rate to the U.S. dollar. The dollar has been going down; along with it the riyal goes down, so imports go up. And practically all the food is imported.
KENYON: There are a few steps Riyadh could take to ease the pain of a slumping dollar, the simplest and for some analysts the most likely would be to revalue the currency. But former journalist and writer Khaled Batarfi says there are growing calls from within the kingdom to delink the currencies altogether. He says many Saudis assume it's U.S. pressure that's keeping the currency's linked and it's easy for people to blame America when they can't feed their families while oil prices are soaring.
Mr. KHALED BATARFI (Journalist): It's much more than they dreamed about and at the same time their ability to buy the necessities of life is decreasing. For me and many of my colleagues, we believe the only way out is doing what the Kuwaitis have done, to separate the dollars from the riyal.
KENYON: It's not just basic foods that are going up. In some areas, rents are up 10 to 50 percent and the cost of imported medicines is anticipated to rise 20 to 30 percent this year, largely because of the flagging buying power of the riyal.
Saudi Arabia is not known for its tolerance of dissent, certainly not in public. But Wahid bin Hashim(ph), an associate professor of political science at King Abdul Aziz University in Jeddah, says as the gross disparity between most Saudis and the extreme wealth of the upper class becomes more and more exposed, unrest could grow.
Professor WAHID HASHIM (King Abdul Aziz University): Before, there were no SMS(ph), no Internet. Now they are beginning to form public opinion, you know, resisting what's happening and criticizing the status quo and the situation, you know, using these methods. So even the students receive 800 riyals a month just to keep them in line, sometimes, somehow, they will start becoming more and more grumbling and discontent.
KENYON: Officials say the chances that the Saudis will sever the link between the riyal and the dollar are slim at the moment, with Riyadh not eager to antagonize its key ally, but calls for revaluing the Saudi currency are not likely to go away. The Financial Times this week quoted the chief economist at a major Saudi bank as saying inflation is likely to continue to rise through the first half of this year.
Peter Kenyon, NPR News, Jeddah.