As world continues to face economic repercussions of coronavirus pandemic countries are bringing in new laws and amendments to make up for the loss. Saudi Arabia’s finance minister on Monday said the kingdom will triple its Value Added Tax (VAT) and halt monthly handout payments to citizens in new austerity measures amid a coronavirus-led economic slump. “It has been decided the cost of living allowance will be halted from June 2020 and VAT will be raised from 5 percent to 15 percent from July 1,” minister Mohammed al-Jadaan said, according to the official Saudi Press Agency.
According to Johns Hopkins University data Saudi Arabia has reported 39,048 cases of infections with 246 deaths till now.
The measures come after Jadaan last week warned of “painful” and “drastic” steps as the government steps up emergency plans to slash spending amid the double shock of the novel coronavirus and record low oil prices. Saudi Arabia, along with other Gulf states, imposed a five percent tax on goods and services in 2018 in a bid to generate additional revenue.
The petro-state had also introduced handouts worth billions of dollars to citizens, known as the cost of living allowance, to cushion the impact of rising costs.
Jadaan has said he expected Riyadh could lose half of its oil income, which contributes about 70 percent of public revenues, as oil prices have fallen two-thirds since the start of the year. He said the world’s leading crude exporter would borrow close to $60 billion this year to plug a huge budget deficit.
The International Monetary Fund in April projected that the Saudi economy would contract by 2.3 percent this year. The organisation has projected that the Coronavirus pandemic will trigger the worst economic fallout in 2020 since the 1930s Great Depression, with only a partial recovery seen in 2021.
Speaking on the social and economic impact of the coronavirus IMF Managing Director Kristalina Georgieva said even though governments had already undertaken fiscal stimulus measures of $8 trillion, more would likely be needed. She said the crisis would hit emerging markets and developing countries hardest of all, which would then need hundreds of billions of dollars in foreign aid.
“Just three months ago, we expected positive per capita income growth in over 160 of our member countries in 2020,” she said on Thursday. “Today, that number has been turned on its head: we now project that over 170 countries will experience negative per capita income growth this year.”