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Sunday, April 14, 2024

Saudi Arabia takes unprecedented steps to save its failing economy

Besieged by corona pandemic and low oil prices, Saudi has decided to raise national borrowing to stimulate its economy. Kingdom has less than 300 reported cases of corona but has taken swift steps to shut down all mosques and transport including planes, buses and taxis for 14 days.

Saudi Arabia plans to raise borrowing by 20 percentage points to 50 percent of GDP to steady an economy rocked by plunging oil prices and the new coronavirus, the finance minister said Friday.

Oil is the mainstay of government revenue and this week slipped below $25 a barrel to touch 18-year lows.

Demand for oil has plunged as a result of the deadly virus hitting demand, while control of supply has loosened, with Riyadh and Moscow engaged in a price war.

“We will raise the proportion of borrowing from 30 to 50 percent of GDP”, said Finance Minister Mohammed al-Jadaan.

The accumulated public debt burden would not exceed 50 percent of GDP until 2022, based on the latest borrowing projections, he said.

Jadaan added that while the deficit would increase, he did not anticipate it exceeding seven percent to nine percent of GDP for the current year.

He warned that the entertainment, sports and tourism sectors would be particularly hard hit as he unveiled a 120 billion riyal ($32 billion) stimulus package to shore up the Middle East’s largest economy.

Kingdom shuts down mosques and public transport 

In response to the COVID-19 pandemic, Saudi’s Interior Ministry said Friday that all public transport would be suspended in an effort to contain the virus’ spread.

The kingdom has 274 cases of COVID-19 according to an official toll and has imposed numerous restrictions intended to limit gatherings.

Read more: Economically challenged Russia starts testing coronavirus vaccine

The rules apply to all internal flights, buses, taxis, trains and ferries “for a period of 14 days beginning Saturday morning”, the official SPA news agency reported.

“The suspension will not apply to means of transport linked to vital sectors like health… or food, energy, water and communications, among others.”

Cargo and travel for reasons of security are exempt from the new measures.

The neighbouring United Arab Emirates, which has recorded 140 cases, has increased restrictions on passenger arrivals.

Only citizens of Gulf Countries will be allowed in and will be “required to undergo a medical examination on arrival followed by a 14 day quarantine period,” the foreign ministry announced Friday.

Read more: Saudi Arabia steps up to take world role on Corona

More than 1,300 coronavirus infections have been detected in the Gulf region, with most cases initially identified among travelers returning from Iran which is one of the world’s worst-affected countries.

AFP with additional input by GVS News Desk