Saudi Arabia has already been compelled to tighten its belt. Now it is preparing for four extra years of austerity.
Slammed with the aid of decrease oil revenues, the kingdom’s budget deficit swelled to 366 billion riyals ($ ninety eight billion) in 2015, and 297 billion riyals this year. It was compelled to borrow cash from global buyers for the first time ever, elevating $ 17.5 billion in October.
but in a new document — the Fiscal steadiness application 2020, printed over the weekend — it warns of dire consequences if it would not press in advance with more dramatic measures.
“the federal government would to find itself in a place of wanting to chop capital spending via at the least ninety%, minimize govt operational spending via at least 30%, minimize government wage bill by as a minimum 30%, and notably lower executive retirement advantages,” it said, if no further motion were taken.
So listed below are some of the steps the government plans to take over the following couple of years:
1. Hike fuel prices, once more
Saudis have long loved closely backed water, gasoline and different power supplies. That started out to alter this year when a “marginal correction” used to be presented, saving the government about 28 billion riyals.
however those price will increase shall be dwarfed via what’s coming down the pipe.
the federal government is anticipating to avoid wasting 209 billion riyals per 12 months by way of 2020 through gradually phasing out subsidies.
“the prices of these products will likely be revised periodically, according to rising the share linkage with the global market costs,” it said.
so one can mean Saudis paying rather more each year to fill their vehicles and funky their houses.
2. raise taxes
the federal government has already raised the cost of visas for guests, and hiked municipal taxes.
however extra tax hikes are coming. From 2017, it’s going to introduce a levy on expat staff and their dependents. The tax will start at one hundred riyals monthly and rise to as much as 800 riyals ($ 213) per month in 2020.
From the 2d quarter of 2017, it will tax dangerous merchandise such as sugary drinks and tobacco.
and then in 2018, as previously introduced, it’ll introduce a normal sales tax as part of a broader initiative by means of the six Gulf Cooperation Council states.
Saudi Arabia expects those measures to raise non-oil revenue by using 152 billion riyals with the aid of 2020.
3. Soften the blow
cutting subsidies and elevating taxes dangers damaging the economic system and hurting decrease income households.
So the federal government has also set out plans to boost the personal sector, including an investment fund price 200 billion riyals to assist diversify the financial system. The fund will have to help companies change into extra environment friendly.
it will also introduce a housing allowance for low and heart earnings households subsequent 12 months. that will cost the federal government as much as 70 billion riyals a yr by means of 2020.
CNNMoney (Dubai) First revealed December 27, 2016: 8:fifty two AM ET
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