Saudi's be hurtin'11 May 2020 10:03
Saudi Arabia has announced plans to raise taxes and cut public spending as it attempts to deal with both the Covid-19 pandemic and a collapse in oil prices.
Taxes on basic goods are to triple to 15%, spending on major projects cut by $26bn and a ‘cost of living allowance’ for individuals is to be scrapped.
“We are facing a crisis the world has never seen the likes of in modern history, a crisis marked by uncertainty,” said the Saudi finance minister and acting minister of economy and planning, Mohammed Al-Jadaan.
“These measures that have been undertaken today, as tough as they are, are necessary and beneficial to maintain comprehensive financial and economic stability.”
Saudi Arabia has experienced a substantial coronavirus outbreak, reporting 39,000 confirmed cases and 246 deaths. But the country has also been hit hard by the fall in oil prices, with crude now trading at around $30 a barrel, less than half the price at the end of 2019.
This is far below the range Saudi Arabia needs to balance its budget. The kingdom has also lost revenue from the suspension of Muslim pilgrimages to the holy cities of Mecca and Medina, which were closed to visitors due to the virus.
The decision to cut $26 billion in expenses, or about 100 billion Saudi riyals, includes cancelling, extending, or postponing some operational and capital expenditures for government agencies, as well reducing costs for major Vision 2030 projects that are the centerpiece of Crown Prince Mohammed bin Salman’s plans for the country.
The cost-of-living allowance, is also to be withdrawn from June, a supplement that had cost the state about $13.5 billion a year.
VAT will also rise from 5% to 15% in July. The tax on most goods and services was only introduced in Saudi Arabia in 2018.
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