Minister of Finance Saudi Arabia Muhammad al-Jadan said that the country from June 1 to suspend the payment of the subsistence level population, and from July 1, threefold increases VAT from 5% to 15% in order to reduce government expenditure against the background of the pandemic COVID-19 and falling oil prices. About how this situation will affect the socio-economic situation in the Kingdom, said experts.
“I would not exaggerate the importance of this fact in view of the fact that Saudi Arabia systematically over a long period of time covered in the financial and economic plan in the event of any kind of unfavorable situations, as in the oil market, as trade and economic ties, says ex-Ambassador of Russia in Saudi Arabia, Deputy Chairman of the Association of Russian diplomats Andrei Baklanov. – The Kingdom plans of conduct of the country in proper conditions, which are not made public.
Saudi Arabia is the second largest in the world after Norway by the number of funds that are on reserve accounts per capita.
That is such a far-reaching and dangerous consequences for the coming months it is difficult to foresee.
Another thing is that, of course, faced with an acute oil crisis and the situation on the background of the pandemic coronavirus, the country is forced, as, however, and other States something to cut back, save, etc. But some fatal nature of the economy to fulfill social obligations is not visible.
the Bad thing is that this situation could adversely affect the ambitious plans of the state programme “Vision 2030”, which includes reforms to transform the economy, its diversification away from such a monopoly position of oil exports. They are subject to change.
In General, the country has enough staff to fulfill its social obligations, to make purchases of weapons and all the other most essential scheduled, according to them, spending at an oil price of only 23-25 per barrel. For the Saudis it is certainly not favorable, but acceptable for priority budgetary allocations.
According to the estimates of some experts, the budget of Saudi Arabia is allegedly structured so that it depends on the numbers $ 80 per barrel of oil. Apparently, these professionals are not very competent in this matter, and they do not understand, as is the budget.
Indeed, the Saudis would like to reach a higher level of financing of the budget is about 50-60 dollars, but in the context of the ambitious government programs.”
“Saudi Arabia is not an exception in this situation, believes Professor of Institute of Asian and Africa of Moscow state University Vladimir Isaev. With similar problems faced by all oil-producing countries. And, of course, they are now trying somehow to compensate for falling revenues from the export of their primary product.
So there is nothing strange, especially given the fact that oil was the main contributor to the budget of Saudi Arabia.
In Riyadh, though, before the intention to raise the VAT and to suspend payments to citizens said that freezing some construction to save money. The country even asked for help to IMF in order to obtain from them some funds to settle its budget.
However, this does not mean that the standard of living in Saudi Arabia would dramatically collapse. For the simple reason that there remain very serious payments from the budget.
in addition, the Kingdom does not exist boards of the population for housing and communal services. All this is borne by the state, given, for instance, the fact that a country with 30 million population lives on desalination plants because there is simply no sources of fresh water. Of course, it is very costly to the budget.
And, of course, certain payments that exist in this country began to decline. For example, if a Saudi family a child is born, in total it to adulthood comes at the expense of about 100 thousand dollars.
I do not think that in KSA are given certain subsidies to students who study abroad. And they have at least two times greater than those scholarships which are paid to Saudis in this country. And it’s also now temporarily canceled, therefore, the income of Saudi students who are currently abroad, also will fall sharply. Therefore, the authorities want to make these students returned home and continued his studies in local universities at a pretty high level.
still, the government keeps its citizens completely free health care and education. So, the package of benefits, referred to by the Minister of Finance, is unlikely to be of great help for the budget of Saudi Arabia.
Yes, it can cause some difficulties or misunderstanding among the population, since it is already used to this kind of paternalistic attitude of the state towards its citizens. But do not believe that this decision of the government could cause widespread social outrage or protests.
as for further developments, it now the whole world expects a recession and, of course, the end of the pandemic coronavirus. But after that happens, the world economy, including Saudi Arabia, will emerge from those crisis moments in which she fell.
Imagine that air will rise t��Aya aviation, people will start to use more of the cars, as usual earn factories. And all this, of course, will require additional amount of fuel that will supply the same Saudi Arabia.
the Fact that the Kingdom’s projected GDP fall somewhere in the area of 5-8%, so it now say many of the EU member States (e.g. France about 7% decrease), United States.
it is Expected that Russia’s GDP will decrease this year. Saudi Arabia is in the same line as other countries of the world. It is, however, to note that she was able to accumulate large enough reserves of foreign currency and foreign capital investments.
it is Important to note that in KSA, the income from these investments has already started to achieve about 20-25% of their income from oil exports. Agree, the figure is huge. And at the moment this money is also not really doing this because of foreign investment do not work, given the global economic slowdown. That is why Saudi Arabia and many other countries have to tighten their belts.”
