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Thu 19 Mar 2020 10:49 AM

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Saudi Arabia slashes $13bn from budget to deal with coronavirus, oil crisis

Almost five percent of expenditure has been redirected to address key issues

Saudi Arabia slashes $13bn from budget to deal with coronavirus, oil crisis

Saudi Minister of Finance and acting Minister of Economy and Planning, Mohammad Al-Jadaan. Image: AFP/Getty Images

Saudi Arabia has cut its state budget by $13 billion as the kingdom directs funds to tackle the spread of coronavirus and cushion the impact of low oil prices.

The amount, which was announced by Minister of Finance and acting Minister of Economy and Planning, Mohammad Al-Jadaan, represents almost five percent of the total expenditure previously approved in the 2020 budget.

According to a report on the state news Saudi Press Agency (SPA) website, further cuts could be made. Developments will be re-evaluated, items of expenditures will be reviewed, and appropriate decisions will be taken in a timely manner, Al-Jadaan said.

He added that providing resources to help combat the coronavirus pandemic was a priority for the government.

On Sunday, Saudi Arabia’s central bank unveiled a 50-billion riyal ($13.3bn) package to support private businesses, which includes 30bn riyals available to banks and financing companies in return for deferring small and medium-size businesses’ loans.

Lowest level

Meanwhile, futures hit their lowest level in almost two decades after Saudi Arabia signalled it was doubling down on a price war with Russia just as demand evaporates. Prices dropped below $25 a barrel for the first time this week since 2003 in London and tumbled 24 percent in New York as the kingdom vowed to keep producing at a record high “over the coming months”.

On Wednesday the Ministry of Energy directed Saudi Aramco to continue to supply crude oil at a level of 12.3 mbd.

Al-Jadaan has stressed that the government’s financial position is still strong, with “huge” reserves and assets to deal with the challenges “and reduce the impact on its goals in maintaining financial sustainability and economic stability in the medium and long term”.

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