Foreign policy unchanged under King Salman

Riyadh, Jul 1: Saudis braced Wednesday for a tripling in value added tax, another unpopular austerity measure after the twin shocks of coronavirus and an oil price slump triggered the kingdom's worst economic decline in decades.

Retailers in the country reported a sharp uptick in sales this week of everything from gold and electronics to cars and building materials, as shoppers sought to stock up before VAT is raised to 15 percent.

The hike could stir public resentment as it weighs on household incomes, pushing up inflation and depressing consumer spending as the kingdom emerges from a three-month coronavirus lockdown.

"Cuts, cuts, cuts everywhere," a Saudi teacher in Riyadh told AFP, bemoaning vanishing subsidies as salaries remain stagnant.

"Air conditioner, television, electronic items," he said, rattling off a list of items he bought last week ahead of the VAT hike.

"I can't afford these things from Wednesday."

With its vast oil wealth funding the Arab world's biggest economy, the kingdom had for decades been able to fund massive spending with no taxes at all.

It only introduced VAT in 2018, as part of a push to reduce its dependence on crude revenues.

Then, seeking to shore up state finances battered by sliding oil prices and the coronavirus crisis, it announced in May that it would triple VAT and halt a cost-of-living monthly allowance to citizens.

The austerity push underscores how Saudi Arabia's once-lavish spending is becoming a thing of the past, with the erosion of the welfare system leaving a mostly young population to cope with reduced incomes and a lifestyle downgrade.

That could pile strain on a decades-old social contract whereby citizens were given generous subsidies and handouts in exchange for loyalty to the absolute monarchy.

The rising cost of living may prompt many to ask why state funds are being lavished on multi-billion-dollar projects and overseas assets, including the proposed purchase of English football club Newcastle United.

Shopping malls in the kingdom have drawn large crowds in recent days as retailers offered "pre-VAT sales" and discounts before the hike kicks in.

A gold shop in Riyadh told AFP it saw a 70 percent jump in sales in recent weeks, while a car dealership saw them tick up by 15 percent.

Once the new rate is in place, businesses are predicting depressed sales of everything from cars to cosmetics and home appliances.

Capital Economics forecast inflation will jump up to six percent year-on-year in July, from 1.1 percent in May, as a result.

"The government ended the country's lockdown (in June) and there are signs that economic activity has started to recover," Capital Economics said in a report.

"Nonetheless, we expect the recovery to be slow-going as fiscal austerity measures bite."

The kingdom also risks losing its edge against other Gulf states, including its principal ally the United Arab Emirates, which introduced VAT at the same time but has so far refrained from raising it beyond five percent.

"Saudi Arabia is taking massive risks with contractionary fiscal policies," said Tarek Fadlallah, chief executive officer of the Middle East unit of Nomura Asset Management.

But the kingdom has few choices as oil revenue declines.

Its finances have taken another blow as authorities massively scaled back this year's hajj pilgrimage, from 2.5 million pilgrims last year to around a thousand already inside the country, and suspended the lesser umrah because of coronavirus.

Together the rites rake in some $12 billion annually.

The International Monetary Fund warned the kingdom's GDP will shrink by 6.8 percent this year -- its worst performance since the 1980s oil glut.

The austerity drive would boost state coffers by 100 billion riyals ($26.6 billion), according to state media.

But the measures are unlikely to plug the kingdom's huge budget deficit.

The Saudi Jadwa Investment group forecasts the shortfall will rise to a record $112 billion this year.

Dubai, Apr 29: Saudi Arabia reported 1,325 new cases of coronavirus, bringing the total number of infections in the country to 21,402, the Ministry of Health announced on Wednesday (April 28).

Meanwhile, the ministry reported 169 recoveries today, with total recoveries in the kingdom at 2,953. There are 125 cases in intensive care.

The ministry also confirmed 5 deaths, bringing the total number of deaths in the kingdom to 157.

Ramallah, May 19: India has given USD 2 million in aid to the United Nations Relief and Works Agency working for the welfare of Palestinian refugees in support of its core programmes and services, including education and health, amidst the coronavirus crisis.

India had increased its annual contribution to the UNRWA from USD 1.25 million in 2016 to USD 5 million in 2019. It pledged another USD 5 million for 2020 which opens its way to become a member of the agency's advisory commission, according to official sources.

The United Nations Relief and Works Agency (UNRWA) applauded India's financial support to keep its basic services operating, especially under the challenges posed by the COVID-19 pandemic.

The contribution was presented to the UN agency by the Representative of India (ROI) to the State of Palestine, Sunil Kumar.

"On behalf of the agency, I would like to express my deep appreciation to the Government of India for advancing part of its contribution, which will help UNRWA address cash flow challenges," Marc Lassouaoui, chief of the Donor Relations at the agency said.

"The continued determination and commitment of India in support of the Palestine refugees is commendable, in particular under the current circumstances brought on us by COVID-19," he said.

"On behalf of the Government of India, I would like to express my appreciation for the commendable work and endeavours carried out by the UNRWA. We believe that our contribution will support the agency's activities in providing the needed assistance to Palestinian refugees, and assist in achieving their full human development potential," Kumar said.

India's contribution will support the agency's "dire" financial situation due to the funding gaps that risk its core services to the Palestinian refugees in the fields of education and health.

About 3.1 million Palestine refugees depend on health services provided by the UNRWA. At the same time, the agency's schools educate 526,000 students every year, of which half are female.

The agency was created in December 1949 by the UN to support the relief and human development of Palestinian refugees.

The UNRWA definition of “refugee” covers Palestinians who fled or were expelled from their homes during the 1948 War.

Meanwhile, India is preparing medical supplies for the Palestinians to help them in their fight against the coronavirus which is likely to reach the Palestine soon, the Indian mission in the West Bank said in a statement.

Prime Minister Narendra Modi last month spoke to Palestinian President Mahmoud Abbas over phone and discussed the challenges posed by the COVID-19 pandemic. He appreciated efforts being made by the Palestinian Authority (PA) to protect its population and assured all possible support from India.

External Affairs Minister S Jaishankar later talked to his Palestinian counterpart Riad Malki and reiterated India's commitment to support Palestine in its battle against the global pandemic.

So far, 554 COVID-19 cases have been detected in the West Bank under PA and east Jerusalem, with two casualties.

Twenty people were found infected with the virus in Gaza, of which 14 are said to have recovered.

Separately, 17 agreements have been signed under an India-Palestine development partnership between the two sides in the fields of agriculture, health care, information technology, youth affairs, consular affairs, women empowerment and media in the past five years.

New Delhi is to provide an assistance of around USD 72 million through these agreements in projects like the post-2014 war reconstruction efforts in Gaza, construction of five schools, setting up a centre of excellence for information and communication technologies at Al-Quds University and developing a satellite centre in Ramallah.