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News > Saudi Arabia

Saudi Arabia Takes Austere Economic Measures Amid COVID-19

  • Saudi Arabia takes austere measures on oil spending and cuts, and more taxes.

    Saudi Arabia takes austere measures on oil spending and cuts, and more taxes. | Photo: EFE

Published 12 May 2020
Opinion

The cost-of-living allowance will be suspended as of June 1st, and the value-added tax will be increased up to 15 % as of July 1st.

Saudi Arabia will triple its value-added tax rate and suspend the cost-of-living allowance for state employees, the country's Finance Ministry said Monday, seeking to shore up finances affected by low oil prices.

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The cost-of-living allowance will be suspended as of June 1, and the value-added tax will be increased to 15 percent as of July 1, according to Finance Minister Mohammed al-Khanadaan.

"These measures are painful but necessary to maintain financial and economic stability in the medium and long term ... and to overcome the unprecedented coronavirus crisis with the least possible damage," Mohammed al-Khanadaan told local press.

In 2018, King Salman of Saudi Arabia ordered a monthly payment of 1,000 riyals ($267) to each state employee to compensate him for the rising cost of living after the government raised domestic gas prices and introduced value-added tax.

About 1.5 million Saudis are employed in the government sector, according to official figures released in December.

The austerity measures being introduced come after the kingdom recorded a $9 billion budget deficit in the first quarter.

The finance minister said that non-oil revenues were affected by the suspension and decline in economic activity, while expenditures increased due to unforeseen pressures on the health sector and initiatives taken to support the economy.

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