COVID-19: Saudi Arabia reports 435 new cases, 8 deaths

May 11: Saudi Arabia will triple its value-added tax rate and suspend a cost of living allowance for state workers, it said on Monday, seeking to shield finances hit by low oil prices and a slump in demand for its lifeline export worsened by the new coronavirus.

Historic oil output cuts agreed by Riyadh and other major producers have given only limited support to prices after they sank on oversupply caused by a war for petroleum market share between the kingdom and its fellow oil titan Russia.

Saudi Arabia, the world's largest oil exporter, is also being hit hard by measures to fight the new coronavirus, which are likely to curb the pace and scale of economic reforms launched by Crown Prince Mohammed bin Salman.

"The cost of living allowance will be suspended as of June 1, and the value added tax will be increased to 15% from 5% as of July 1," Finance Minister Mohammed al-Jadaan said in a statement reported by the state news agency. "These measures are painful but necessary to maintain financial and economic stability over the medium to long term...and to overcome the unprecedented coronavirus crisis with the least damage possible."

The austerity measures come after the kingdom posted a $9 billion budget deficit in the first quarter.

The minister said non-oil revenues were affected by the suspension and decline in economic activity, while spending had risen due to unplanned strains on the healthcare sector and the initiatives taken to support the economy.

"All these challenges have cut state revenues, pressured public finances to a level that is hard to deal with going forward without affecting the overall economy in the medium to long term, which requires more spending cuts and measures to support non-oil revenues stability," he added.

The government has cancelled and put on hold some operating and capital expenditures for some government agencies, and cut allocations for some reform initiatives and projects worth a total 100 billion riyals ($26.6 billion), the statement said.

Central bank foreign reserves fell in March at their fastest rate in at least 20 years and to their lowest since 2011, while oil revenues in the first three months of the year fell 24% from a year earlier to $34 billion, pulling total revenues down 22%.

"The reforms are positive from a fiscal side as greater adjustment is essential. However, the tripling of VAT is unlikely to help that much in 2020 revenue wise with the expected fall in consumption," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

She said she kept unchanged her deficit forecast of 16.3% of GDP for this year, which already factors in a greater than previously announced spending cut.

About 1.5 million Saudis are employed in the government sector, according to official figures released in December.

In 2018, Saudi Arabia's King Salman ordered a monthly payment of 1,000 riyals ($267) to every state employee to compensate them for the rising living costs after the government hiked domestic gas prices and introduced value-added tax.

DIFFICULT TIMES

A committee has been formed to study all financial benefits paid to public sector employees and contractors, and will submit recommendations within 30 days, the statement said.

In late 2015, when oil prices fell from record highs, the kingdom slashed lavish bonuses, overtime payments and other benefits once considered routine perks in the public sector.

In a country without elections and with political legitimacy resting partly on distribution of oil revenue, the ability of citizens to adapt to such reforms is crucial for stability.

"Tripling the VAT will test the limits of the balance between revenues and consumption as the economy dives into a deep recession. The move will impact consumption and could also lower the expected revenues," said John Sfakianakis, a Gulf expert at the University of Cambridge.

"These are pro-austerity and pro-revenue moves rather than pro-growth ones," he said.

Hasnain Malik, head of equity strategy at Tellimer, said the VAT rise could bring about $24-$26.5 billion in additional non-oil fiscal revenue. The rise would hit consumer spending further but was a needed step towards fiscal sustainability, he said.

Dubai, Jul 14: The UAE-based parents of children under 12 stranded in India are in a tight spot with multiple airlines refusing to accept unaccompanied minors.

Starting July 12, Indians wanting to return to the UAE have been given a 15-day window to travel back on the condition that they have valid residency permits. They also have to produce a negative Covid-19 test result.

But parents of minors said they are feeling helpless as children are unable to avail of the travel opportunity despite having return permits.

"It has been more than three months since my daughter has been stuck in India. We have GDRFA approval for her but the airlines are not accepting her booking, saying she is under 12," Poonam Sapre, a Dubai-based mother, told Khaleej Times.

Her daughter Eva Sapre, 10, is in Hyderabad and is awaiting a reunion with her parents.

"She is just 10 and it has already taken an emotional toll on her. She is eager to come back and is asking me every day about her return. This is so frustrating."

Barring Emirates and Etihad, other airlines including flydubai, Air Arabia and Air India Express are not accepting unaccompanied minors. With India extending the travel freeze till July 31, normal flights are yet to resume and only special flights are allowed between India and UAE under a bilateral agreement.

Sapre said only flydubai is flying the Hyderabad-Dubai route, and the carrier has restrictions on minors travelling alone. "My daughter is too young to fly through indirect routes," claims the mother.

When Khaleej Times reached out to the airlines for comment, they confirmed that such rules on unaccompanied minors were already in place even before Covid-19 travel restrictions came into effect.

Another Dubai-based distressed parent, who did not want to be named, said her eight-year-old son is in Kerala and is unable to fly due to airline policies on unaccompanied minors.

"I called up Air India Express and they said this has been their rule even before the Covid-19 outbreak. I am appealing to them to re-consider and make an exception during these trying times so that our children can come home safely," she said.

Faced with this eventuality, some parents are forced to fly out of the UAE so they can accompany their children on the flight back home.

An Indian mother, who is currently in Mumbai, said she flew out of Dubai on Monday morning solely for the purpose of bringing back her twin daughters, aged 10.

"I had no choice. Ideally, they could have travelled together, but under these circumstances I thought it best to get them with me personally," said the mother.

Abu Dhabi, Jul 23: Muslims in the United Arab Emirates have been asked to perform Eid Al-Adha prayers at home even as mosques will be allowed to operate at an increased capacity of 50 percent from Aug. 3.

Mosques in the UAE have been operating at 30 percent capacity after they reopened on July 1.

Announcing the move, Dr. Saif Al Dhaheri, the official spokesman for the National Emergency, Crisis and Disasters Management Authority, stated that after assessing the situation and coordinating with the concerned authorities, it was decided that Eid Al-Adha prayers would be conducted in homes and takbeers broadcast through visual and audio means.

He also announced that the Emirates Fatwa Council has recommended that donations and sacrifices should be to official charitable causes in the country only.

Al Dhaheri advised the public to donate during this time to the official charitable bodies in the country with sacrifices and donations, through smart applications concerned with sacrifices or through slaughterhouses outlined by the local authorities that guarantee the application of precautionary and preventive measures and provide remote services without the need to enter livestock markets or slaughterhouses.

Al Dhaheri stressed the need to avoid family visits and gatherings, and replace them using electronic means of communication or phone contact, as well as refraining from distributing Eid gifts and money to children and individuals during this occasion recommending to instead use of electronic alternatives.

Al Dhaheri pointed out that it is necessary to avoid visiting pregnant women, children and those with chronic diseases who are most vulnerable to COVID-19 and not to allow them to leave the home and avoid going out to public places to preserve their health and safety.