Stop price increases and increase “value added”. Saudi Arabia announces package of measures aimed at reducing costs

Saudi Arabia’s Minister of Finance and Minister of Economy and Planning, Mohammed bin Abdullah Al-Jadaan, said that the global crisis of the spread of the Corona virus pandemic has caused 3 shocks in the Kingdom’s economy, each of the which is capable of causing a change that affects the performance and stability of public finances unless the government intervenes in measures to absorb these shocks.

The Saudi minister added, according to the official news agency «SPA», that the spread of the epidemic and the precautionary measures taken by the countries of the world resulted in a first shock represented by an unprecedented decrease in oil demand, that negatively affected the price level and caused a sharp decrease in oil revenues, which is an excellent source for public revenues from the state budget.

The second shock was that the preventive measures necessary to preserve the life and safety of citizens and residents and prevent the spread of the pandemic caused many local economic activities to stop or decrease, and this negatively affected the volume of non-oil income and economic growth.

As for the third of these shocks that affected public finances, it was urgent needs on the side of unplanned spending that required government intervention by continually increasing credits to the health sector to support the preventive and curative capacity of health services, in addition to adopting a series of initiatives to support the economy, mitigate the impact of the pandemic and maintain employment. Citizens

The minister noted that these combined challenges led to a decrease in government revenue and pressure on public finances to levels that are difficult to manage later without damaging the kingdom’s macroeconomics and public finances in the medium and long term, and by therefore more expenses and measures must be achieved to support stable income. Consequently, the Ministry of Finance and Economy and Planning presented the financial and economic developments and the proposed measures to face these developments. The directive was issued to take the most appropriate, least damaging, and lightest measures.

The impact of what has been approved of the measures has reached almost 100 billion riyals, including: canceling, extending or postponing some items of capital and operating expenses to various government agencies and reducing credits from a series of initiatives to achieve vision and important projects for the fiscal year (1441/1442 AH) (2020 AD).

In addition to that, it was decided to stop the cost of living subsidy from June 2020, and to raise the rate of value added tax from (5%) to (15%) from the first of July. of the year 2020.

To increase the efficiency of the exchange, a ministerial committee was formed to study the financial benefits that are spent on all public employees, contractors, and the like who are not subject to the civil service system in ministries, departments, institutions, agencies, centers and government programs, and to formulate recommendations within (30) days from its date.

The Minister stressed the importance of measures aimed at protecting the Kingdom’s economy to overcome the unprecedented global crisis of the Corona pandemic and its financial and economic repercussions with the least possible damage, and stressed that these measures are a complement to the decisions taken in advance to limit the aggravation of the negative effects of the crisis on its various health, social and economic aspects, and that the government continues making decisions necessary to protect citizens, residents and the economy from the outset to reduce the worsening of the crisis and its consequences.

The minister concluded by saying: “We are facing a crisis that the world has not witnessed in recent history, among which the most important characteristics are uncertainty and the difficulty of knowing and anticipating its scope and repercussions in light of the daily developments that require governments to handle them with vigilance and the ability to make appropriate decisions at the appropriate times and to respond quickly and adapt to conditions In a way that achieves the public interest, protects citizens and residents, and provides basic needs and Necessary medical services, and that the measures that were taken today, even if there is pain, are necessary and will be, God willing, to maintain financial and economic stability from your perspective. Ml in the medium and long term, in the interest of the nation and its citizens.