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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.

Jeddah, May 1: The government of India and its diplomatic missions in the Gulf Cooperation Council (GCC) States have begun elaborate preparations for the massive evacuation of their nationals stranded or needing to return once the lockdown travel restrictions are lifted.

The Indian missions in Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Bahrain, Oman and Qatar have started registration for the return of their nationals. The move coincides with the directive of New Delhi to the Indian Air Force and Navy to get their big engines ready to bring back citizens stuck in the GCC states.

India’s External Affairs Minister S. Jaishankar has stated that the Indian missions in the GCC states have been liaising with local authorities for repatriation of Indians. More than eight millions Indians work and live in the Gulf countries.

The Indian Embassy in Saudi Arabia said that it has issued directives to their nationals who seek repatriation to India to fill an application form so as to facilitate their travel when the authorities lift the travel restrictions. Similar advisories have also been issued by the embassies in other Gulf States.

The Riyadh Embassy said in a press statement that the purpose is only to collect data and no decision has been taken yet regarding resumption of flights to India.

The Embassy will make an announcement with regard to repatriation of Indian nationals when the government of India takes a decision in this regard, the statement said, adding that separate forms have to be filled for each individual, including Indian worker or his or her family members.

The Embassy is in the process of working out the modalities of evacuation of stranded Indians in line with the directions of the government of India, the statement pointed out.

The Embassy and the Consulate General in Jeddah are closely monitoring the situation and are taking all the required measures to ensure the welfare of Indian citizens.

The missions have taken all the necessary measures for the supply of food, medicines and other emergency assistance to Indians in need and that is in coordination and cooperation with volunteers of major community organizations across the Kingdom.

These initiatives have been accelerated following the interactions of Ambassador Dr. Ausaf Sayeed with community volunteers and social workers from all parts of the Kingdom. The Embassy has also been in touch with all major companies in the Kingdom that employed Indian workers to carry out regular monitoring of the workers’ health, especially in labor camps, and take all other precautionary and preventive measures to ensure their health and safety.

According to the plan drawn up by the government of India, the first commercial flights from the Gulf could start after May 3, if the nationwide lockdown restrictions are not extended.

INS Jalashwa, an amphibious assault ship, and two Magar class tank-landing ships are being readied for the evacuation purposes, India’s IANS reported.

These ships, which have a total capacity of 2,000 people, have started making arrangements as per the standard protocols laid out to deal with suspected coronavirus cases like social distancing and sanitization.

The Indian Air Force has been evacuating citizens from coronavirus hit countries such as China, Japan, Iran, Italy and Kuwait since January. The force has stated that it has kept C-17 Globemaster and C-130s on standby which can be used whenever they are required.

Apart from them, Air India flights are also being kept on standby to pick up stranded Indians from the GCC countries.

15 Indian fatalities in western region

Speaking to Saudi Gazette, Indian Consul General Mohammed Noor Rahman Sheikh said that as of Thursday a total of 15 Indian coronavirus fatalities were reported in the western region.

These included seven cases in Makkah, six in Madinah and two in Jeddah. Around 140 Indians have tested positive in the region where most of the coronavirus cases in the Kingdom have been reported.

He said that permission was not accorded from the Ministry of Haj and Umrah to use the Indian Haj mission facility in Makkah as the center to assist the community members with regard to the coronavirus related cases.

“Our medical in charge is in Makkah and with the support of some other staffers, he has been actively involved in lending a helping hand to those Indian nationals who are in distress,” he said.

“We are in regular contact with the Ministry of Health officials in ensuring quick medical assistance to those who are tested positive.” He said preparations are under way for repatriation of Indians once permission is ready to take them home. “We are maintaining a database of all those who contacted the consulate with a request for their repatriation,” he added.

Meanwhile, the bodies of two Indians from the southern state of Kerala who succumbed to the pandemic were buried in Makkah. Naletil Muhammad from Ancharakkandi of Kannoor district, a restaurant worker in Makkah, gave samples at King Faisal Hospital a few days ago after developing symptoms of the disease.

When the hospital authorities advised him to remain in medical isolation, he reportedly preferred to remain in isolation at his residence where he succumbed to the pandemic after a few days.

Muhammad’s two sons, who are working in Riyadh, alerted his colleagues when they failed to contact him over phone. They found him dead at his residence on Monday. Eventually, Ministry of Health officials sent all his six colleagues to medical isolation.

Kottuwala Ippu Musliyar from Thennala, Vengara in Malappuram district, was a well-known social worker in Makkah. He died of coronavirus at Hira Hospital on Wednesday after undergoing treatment for a couple of days.

Mujeeb Pukkottoor, a prominent Indian social worker and general secretary of Makkah chapter of Kerala Muslim Cultural Center, was authorized by their spouses to carry out their burial procedures.

Accordingly Muhammad was buried on Wednesday and Ippu Musliyar on Thursday at the designated area for the coronavirus deceased persons at Sharaie Cemetery in Makkah.

Dubai, Apr 12: Saudi Arabia reported 429 new cases of coronavirus, bringing the total number of infections in the country to 4462, the Ministry of Health announced on Sunday.

The ministry also confirmed 7 deaths bringing the total number of deaths in the kingdom to 59.

According to the ministry of health the number of recoveries are 41 cases, making total of recoveries 761.

Ministry also said that 40,000 have been quarantined since the beginning of the epidemic, and only 7,000 remain in quarantine, including those who recently returned from abroad.

Extension of curfew

Early on Sunday, King Salman approved the extension of curfew until further notice due to current rates of coronavirus spread, the official news agency SPA announced.

Earlier last week, Saudi Arabia imposed a 24-hour curfew and lockdown on the cities of Riyadh, Tabuk, Dammam, Dhahran and Hofuf and throughout the governorates of Jeddah, Taif, Qatif and Khobar.

Authorities had already sealed off the holy cities of Makkah and Medina along with Riyadh and Jeddah, barring people from entering and exiting as well as prohibiting movement between all provinces.

Total lockdown on Medina neighbourhoods

The Ministry of Interior also announced a total lockdown on five neighbourhoods in Medina on thursday until further notice. The neighborhoods include Al Sherbat; Bani Dhafar; Qurban, Al Jumuah; and parts of Al Iskan district and Bani Khudrah. No one is allowed to enter or exit these areas.

An official source from the ministry highlighted that the Ministry of Labor and Social Development will provide residents of these neighbourhoods with food baskets and will follow up on their needs while the ministry of health will provide them with necessary medications.

Saudi Arabia, which has reported the highest number of infections in the Gulf, is making every possible effort to limit the spread of the disease at home.