RIYADH: Saudi Arabia has decided to suspend the cost of living allowance and increase the value-added tax (VAT) to address the impact of the COVID-19 crisis, the Saudi Press Agency (SPA) reported on Monday.
“Cost of living allowance will be suspended as of June first, and the value added tax will be increased to 15% from 5% as of July first,” SPA said, citing statement of the Ministry of Finance.
Economy battered by oil-war
Finance Minister Mohammed Al-Jadaan said that both the measures are taken to shore up state finances, which have been battered by low oil prices and the coronavirus crisis.
“Saudi Arabia would have to take strict and painful measures to deal with the twin impact of coronavirus pandemic and falling world oil prices,” Al-Jadaan warned last week.
Projects slowed down
“We must reduce budget expenditures sharply,” Al-Jadaan said. “Some government projects may be slowed down to reduce expenditure,” he added.
“Current actions taken to date to cut spending are not enough, and Saudi public finances will need more control and the journey ahead is long,” he said.
Global economy
The pandemic has wrecked the global economy, leaving millions jobless, with the US alone reporting more than 20 million people becoming unemployed in April.
Tthe COVID-19 has infected more than 4.18 million people globally as of early Monday.
The number of infections rose to 39,048 in Saudi Arabia, as of Sunday, of which 27,345 were active cases and 11,457 have recovered.