Frank Kane

DUBAI: Saudi Arabia will not enter a new “age of austerity” because of the twin hits to its economy from the COVID-19 pandemic and the fall in oil prices, Finance Minister Mohammed Al-Jadaan pledged on Wednesday.

“Saudi Arabia is not in austerity and we are not getting into an austerity phase,” the minister said. “The world is facing a serious impact from COVID-19, and Saudi is no exception. We are also facing a serious impact from oil price volatility.”

Al-Jadaan said the government had not reduced spending and the budget set out last year would be maintained, but some funds would be reallocated to health care and away from projects delayed by anti-pandemic measures. “So from that point of view, we are not taking austerity measures,” he said.

The minister told a Bloomberg online seminar that the recent tripling of VAT to 15 per cent was part of a strategy to assess all fiscal options, and that much of the increased revenue would be directed “to provide better services to the people.”

The total stimulus injected by the government to combat the fallout from the pandemic amounted to about $65 billion, he said, and liquidity was “ample” in the system.

Asked if the Kingdom would consider further stimulus in the event of a “second wave” of economic damage, he replied: “We stand ready, we are assessing the needs of the economy. But yes, definitely, we will provide whatever support is needed to ensure the economy recovers.”

He left open the possibility that the Kingdom could introduce some form of income tax. “We consider all options available,” he said, but also pointed to the long-term challenge of introducing such a tax from scratch. “I’m not ruling anything out, but nothing is imminent,” he said.

Al-Jadaan said Saudi Arabia would “double down” on the investment program to implement its Vision 2030 diversification strategy. “These are long-term strategies, and by the time COVID-19 dies down, they will have borne fruit,” he said.

In particular, the privatization program would be continued, he said. The Kingdom had received “very attractive bids” for some state-owned businesses, and the water industry, health care and education could form part of a privatization plan that could bring in more than SR50 billion ($13.3 billion) in the next few years.

Al-Jadaan said the government was still considering whether this year’s summit of leaders of the G20, of which Saudi Arabia is president, would be a physical event, a digital forum, or a hybrid of the two.

“We want to showcase Saudi Arabia,” he said.