Saudi Arabia: Corona virus and oil price crisis

Saudi Arabia was once known for being tax-free. But now the same country has announced that it is raising the value-added tax from 5% to 15% and canceling the monthly housing subsidy from next month.

The move comes at a time when global oil prices have fallen by less than half over the past year, cutting government revenues by 22 per cent and halting major projects.

Saudi Arabia's state-owned oil company Aramco reported a 25 percent drop in gross profit in the first quarter of this year, mainly due to lower crude oil prices.

According to Michael Stephens, a Middle East analyst, "these measures reflect efforts to curb spending and stabilize low oil prices." Saudi Arabia's economy is in a state of crisis and it will take some time for things to return to normal.

First some background. The Corona virus epidemic has hit the world's economies hard, and Saudi Arabia is no exception.

It has a sovereign wealth fund called the Public Investment Fund worth about 20 320 billion, on which it will now rely.

It also owns state-owned oil company Aramco, which was valued at 17 1.7 trillion last year, the equivalent of the combined price of Google and Amazon at the time.

This week's cuts were bad news for many Saudis who were hoping that the country's economy would no longer depend on oil and that Saudi Arabia's future would be strengthened.

Even the country's finance minister described them as "painful measures". The government aims to save 26 26 billion, but Saudi Arabia's central bank has suffered almost as much damage in March alone as the Code 19 virus and falling oil prices.

The budget deficit for the first quarter of this year is estimated at ارب 9 billion.

Today, Saudi Arabia seems to be a much smaller place than before.

But behind the scenes, political repression has intensified and anyone who dares to question its policies is at risk of arrest and imprisonment after being declared a 'threat to national security'.

The beheading is still the most criticized form by human rights groups.

All of this means that Saudi Arabia is a major player in the international economy and is hosting the next G20 summit in November, but still feels ashamed of its Saudi partner.