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Saudi Arabia Imposes Austerity Measures

By VOA News May 11, 2020

Saudi Arabia says it is tripling its VAT (value added tax) and suspending cost-of-living allowances.

Riyadh said is initiating the austerity measures to offset dwindling coffers caused by the costs of dealing with the COVID-19 pandemic and the turndown in global energy prices.

"These are the priorities: the health care of people and the livelihood of people," Finance Minister Mohammed Al-Jadaan told Bloomberg News Monday. "We want to make sure that we maintain our fiscal strength so that as the economy gets out of the lock-down, we are able to support the economy."

The two-year-old VAT will increase from 5% to 15%, beginning July 1. The imposition of the higher tax comes as residents of the kingdom are dealing with reduced incomes due to furloughs and pay cuts caused by the new coronavirus.

In June, state workers will stop receiving their cost-of-living allowances.

"These measures are painful, but necessary," the finance minister said.

The BBC reports Saudi Arabia's state spending surpassed its income in the first three months of this year, leaving the kingdom with a $9 billion deficit.

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