Page 6 - MEOG Week 12
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MEOG Commentary MEOG
 Saudi brings in
stimulus measures to
deal with price war
In an attempt to head off the challenging economic storm, Saudi Arabia has come up with a major package, but the headwinds it is facing make recovery a far-distant prospect.
 sauDI arabIa
What:
Saudi Arabia has approved a major financial package to stimulate its economy.
Why:
The stimulus is an effort to mitigate the effect of the recent oil price crash.
What next:
A plunging world economy makes a quick recovery in the oil price very unlikely.
SAUDI Arabia’s government has unveiled stim- ulus measures amounting to 120bn Saudi riyals ($32bn) on Friday to support an economy hit by the double blow of the coronavirus (COVID-19) crisis and dramatically lower oil prices.
The sum includes a 50bn riyal package unveiled last week to support small and medi- um-sized businesses and introduces a further 70bn riyals to aid businesses, including the post- ponement of tax payments and exemptions of various government levies and fees. It is looking to borrow more to finance a widening deficit.
Saudi Arabia will also look to increase its bor- rowing this year, finance minister Mohammed Al-Jadaan said, to finance a deficit which, it is estimated, could widen to a maximum of 7%-9% by the end of the year, from an earlier projection of 6.4%.
“We have huge reserves and very large investments, but we don’t want to liquidate any of these, so we will borrow ... I don’t expect the deficit by the end of 2020 to exceed 7%-9%, and this is our target.”
King Salman, whose country has recorded no coronavirus deaths so far, has approved rais- ing the debt ceiling to 50% of GDP from 30%, said the minister. “We don’t expect (borrowing) to exceed 50% until 2022 and this year we don’t expect borrowing to exceed 100bn riyals, and it could be less,” Jadaan said.
The relief measures in the new stimulus package include exemptions on expat levies, postponing some private sector fee payments to the government, and postponing the collec- tion of customs duties on imports. It also allows employers to extend exit and re-entry visas free of charge for three months and enables busi- nesses to delay paying value-added tax, income tax and other levies for the next three months.
Earlier last week, the kingdom cut its 2020 budget by almost 5%, a step that many econo- mists predict will be the first in a series of cut- backs and potentially even austerity measures to keep its finances intact amid oil prices plunging by nearly 60% so far this year.
According to the Saudi Press Agency, Jadaan commented: “the government approved a par- tial reduction in some items with the least social andeconomicimpact”.Headded:“inviewofthe possible continuation of the effects of the spread of COVID-19 and its consequences on the global economy, the developments will be reassessed, items of expenditures reviewed and appropriate decisions will be taken in a timely manner.”
Saudi Arabia has taken sweeping measures to stem the spread of the coronavirus, including suspending numerous flight routes and tempo- rarily halting entries for religious pilgrims com- ing to the kingdom for the Hajj, a journey taken by some 2mn Muslims annually.
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w w w . N E W S B A S E . c o m Week 12 25•March•2020












































































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