Saudi Arabia has made “painful” decisions to triple the value-added tax (VAT) and suspend housing allowances for government employees to revive its corona-infected economy.
Saudi Arabia’s revenues have declined due to global epidemic and lower oil demand and prices in international markets. Notably, the country is one of the largest oil exporters.
Saudi Arabia introduced the VAT two years ago to reduce its economy’s dependence on global crude oil markets. The emergency plan is expected to raise 26.6 billion.
Finance Minister Mohammed al-Jadan said in a statement: “These measures are painful but necessary to achieve financial and economic stability in the medium and long term.”
COVID-19: Saudi Arabia to cut salaries by 40%
He also said that under the government’s austerity drive, the expenditure of some institutions was being “suspended, postponed or extended”. The costs of the Vision 2030 reform program has also been cut down.
A committee has been formed which will review the incentives available to government officials and contractors within 30 days and give its recommendations.
According to John, a University of Cambridge professor, “In a major economic crisis, tripling VAT to balance income and expenditure will be a test. These are austerity measures to increase revenue, not increase productivity.
The announcement comes at a time when spending in the country has exceeded revenue. In the first three months of this year, Saudi Arabia’s budget deficit was $ 9 billion. Meanwhile, foreign reserves in Saudi Arabia’s central bank have also dwindled.
CAA Allows Saudi Arabian plane to land in Islamabad
Measures to prevent and combat the coronavirus are expected to affect the pace and scope of economic reforms introduced by Saudi Prince Mohammed bin Salman.
Last year, Riyadh’s stock market saw a sharp rise in shares of Saudi Arabia’s largest oil company, Aramco. The giant made $ 25.6 billion from the sale of its shares.
It is to be remembered that Aramco produces one tenth of the world’s crude oil.
The sale of shares was an important part of Prince Mohammed bin Salman’s economic plan. The Saudi royal family sold Aramco’s shares to reduce its dependence on oil and modernize the economy.
Stay tuned to Baaghi TV for latest news and updates!
