Saudi Arabia Imposes Austerity Measures

Saudi Arabia Imposes Austerity Measures

‏Aljadaan said that the Ministry of Finance and the Ministry of Economy and Planning have presented measures to tackle these challenges, and a directive has been issued to undertake the most suitable and least harming measures. If Saudi Arabia makes good on its pledge, its production will drop to the lowest since mid-2002, according to data compiled by Bloomberg.

Saudi Arabia is tripling its value added tax (VAT) as part of austerity measures to support its coronavirus-hit economy. In December last year, they had been diminished to $499bn, a loss of $233bn in four years, according to the Saudi Arabian Monetary Authority.

"While the measures that were taken today may be painful, they are necessary and beneficial to protect fiscal and economic stability in the short and long term", finance minister Mohammed Al-Jadaan said in a statement on Saudi Press Agency.

These measures are expected to slow down the pace and scale of the economic reform programme "Vision 2030", which is trying to implement crown Prince Mohammed bin Salman. 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 fall in income pushed Riyadh to a budget deficit of 34.1bn Saudi riyals ($9bn, £7.3bn) in the first three months of the year. Oil revenues specifically were down 24 percent, compared to the same quarter past year.

Saudi Arabia has had some 39,000 confirmed cases of the coronavirus, including 246 deaths.

Additionally, the government will discontinue the cost-of-living allowance, starting in June.

Riyads austerity policy is seen exacerbating public anger amid an already high cost of living and scrutiny of multibillion-dollar state projects.

Saudi Arabia's tax hike announcement immediately weighed on markets and investor sentiment in the Gulf, as neighboring states were feared to follow suit.

Historic oil output cuts agreed by Riyadh and other major producers have given only limited support to prices after they sank on oversupply caused by a war for petroleum market share between the kingdom and its fellow oil titan Russian Federation.

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