On May 11, 2020, Mohammed al-JADAAN Saudi Arabia finance minister said the kingdom will triple its Value Added Tax and halt monthly handout payments to citizens as part of a series of austerity measures due to coronavirus led economic slump.
“It has been decided the cost of living allowance will be halted from June 2020 and VAT will be raised from 5 percent to 15 percent from July 1” said in a statement the finance minister Mohammed al-JADAAN released by the official Saudi Press Agency.
JADAAN said the measures were necessary to shore up state finances amid a “sharp decline” in oil revenue as the coronavirus pandemic saps global demand for crude.
The government was also “cancelling, extending or postponing” expenditures for some government agencies and cutting spending on major state projects introduced as part of an ambitious reform programme to diversify the oil-reliant economy. He warned of “painful” and “drastic” steps to deal with the double shock of the coronavirus and record low oil prices.
Riyadh could lose half of its oil income, which contributes about 70 % of public revenues, as oil prices have fallen two-thirds since the start of the year.
Saudi Arabia has posted a budget deficit every year since the last oil price rout in 2014.
The International Monetary Fund projected in April that the Saudi economy would contract by 2.3 % in 2020.
The austerity measures are likely to increase criticism of the government’s multi-billion-dollar push to host entertainment and sporting extravaganzas as part of economic diversification plans.
Crown Prince Mohammed bin SALMAN’s other ambitious plans to wean the economy away from oil remain vulnerable to austerity measures.
This article was edited using the data from the Bbc.com, English.alaraby.co.uk, Dailymail.co.uk and, Bloomberg.com.
Source of the photo: www.cnbc.com.