Saudi Arabia is taking new austerity measures to cope with the impact of the coronavirus pandemic and low oil prices, announcing that it would triple its VAT and slash a cost-of-living allowance for government workers, according to reports and comments from the Kingdom’s finance minister H.E. Mohammed Al-Jadaan.
The steps taken will save or create 100 billion riyals ($26.6 billion) in total, according to the Saudi Press Agency. Overall spending for 2020 will remain close to what was planned as money saved gets re-allocated to health care and aid for businesses, according to Bloomberg.
Saudi Arabia, the world’s largest oil exporter, is being hit hard by a combination of low oil prices and measures to fight the coronavirus. The combination is “likely to curb the pace and scale of economic reforms launched by Crown Price Mohammed bin Salman,” Reuters reports.
In a telephone interview with Bloomberg, Al-Jadaan explained the new measures as the best choice of several tough options.
“We looked at a lot of options and their impact economically, financially and socially. What we have seen from the announced measures are the ones that the team, both economists and other experts, thought would be the least damaging to the economy and the fiscal strength of the country,” Al-Jadaan told Bloomberg.
“This is an unprecedented case and each country has its own circumstances and its own strengths that it uses to support its economy. While, for example, you’ll see in the West the heavy employers are the private sector, so the government is spending a lot of money because those in the private sector are losing their jobs. In Saudi Arabia, the government is still the largest employer, and government employees are continuing to be employed, and we are supporting the Saudi workforce to ensure that the private sector keeps them employed. Each country is different and therefore they need different tools.”
