Saudi Arabia Steps Up Measures To Address Economic Crisis

Saudi Arabia Steps Up Measures To Address Economic Crisis

Saudi Arabia will triple its value-added tax (VAT) under austerity measures announced to reduce the effects of the Coronavirus outbreak on the economy. The Riyadh government will also suspend the livelihood allowance given to public employees. The Coronavirus outbreak caused global energy prices to fall, causing the oil-rich country's revenues to drop dramatically. In Saudi Arabia, VAT was enacted two years ago. The decision was made as part of efforts to reduce the country's dependence on oil revenues.

VAT will be 15 percent on July 1

VAT will rise from 5 percent to 15 percent from July 1, according to Saudi Arabia's official news agency. Subsistence allowances will be halted from June 1. "This prescription is painful but imperative to maintain our financial and economic stability in the medium and long term," Finance Minister Mohammed Al-Jadaan said in a statement. In Saudi Arabia, public spending in the first three months of the year exceeded the country's revenues, resulting in a $ 9 billion budget deficit.

Oil revenues fall 24 percent

During the same period, the country's oil revenues fell 24 percent to $ 34 billion compared with last year's first quarter. The result was a 22 percent reduction in the country's total revenues. In March, the central bank of Saudi Arabia's foreign exchange reserves suffered the fastest decline in the past 20 years. Reserves have fallen to the lowest level seen since 2011. The measures taken to combat the Coronavirus outbreak will slow and narrow the scope of economic reforms initiated by Crown Prince Mohammed bin Salman. The state-owned Aramco oil company in Saudi Arabia went public last year. In the largest IPO in history, Riyadh raised $ 25.6 billion in funding.