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Mon 11 May 2020 01:24 PM

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Kingdom won't increase $58bn borrowing, says Saudi finance minister

Kingdom has announced a range of austerity measures to deal with low oil prices and Covid-19 impact

Kingdom won't increase $58bn borrowing, says Saudi finance minister

Saudi Finance Minister Mohammed Al-Jadaan.

Saudi Finance Minister Mohammed Al-Jadaan has said there are no plans to increase borrowing, after he announced a number of austerity measures on Monday amid record low oil prices and the economic slump caused by the coronavirus outbreak.

This included tripling its value added tax (VAT) from five percent to 15 percent from July 1 as well as stopping handout payments to citizens, which will take effect from June.

The kingdom had previously announced plans to boost borrowing to SR220 billion ($58bn) this year as it absorbs the shock of its budget.

In an interview with Bloomberg, Jadaan said: “I don’t think we will be increasing that. As we look at the current fiscal situation, we think that 220bn riyals will be sufficient to bridge the gap.

“So between the reduction in spending, the efficiencies we are putting into the system, the savings we are making in any case because of the lockdown, because people are not traveling, because we are not training people abroad, because we are not spending on sports activities, entertainment activities and tourism promotion -- there are a lot of savings there in any case.

“So I think between that and cutting spending now and a few weeks ago, I think we will manage with 220bn riyals.”

'Drastic'

Jadaan last week warned of "painful" and "drastic" steps to deal with the double shock of the novel coronavirus and record low oil prices.

He said some operational and capital spending will be cancelled or delayed, although there will still be a strong focus on housing and hospitality projects.

While spending will be reduced on some programmes under Crown Prince Mohammed bin Salman’s ‘Vision 2030’ economic transformation plan.

“The big projects are continuing as per their schedule, though some had to be extended because of what is happening. Because most are in isolated areas, we managed to put in place the necessary health and safety measures to protect the workers. It may not be as fast as it used to be, but they are continuing,” said Jadaan.

“Some of these projects’ infrastructure that was supposed to be built by the government could be extended, whether it is roads, water pipes, etc. based on the new schedule of these projects, some of the infrastructure projects have also been extended, which is like north of 10bn riyals.”

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