Saudi Arabia has been going through the worst phase of its history as far as financial situation is concerned. The actual deficit for the year 2017 is $62 billion and the main reason for this deficit is the reduction in oil prices.
The prices of oil which were in the range of $115 per barrel in the summer of 2014 have been revolving within the range of $65 to $70 per barrel. Oil prices dipped in the mid-$20 range in the month of January 2016, hitting 12 years low.
However, I believe that Saudi government will make its way out of this financial crisis. The measures which have been taken so far by King Salman and its team show that the darker times are going to end very soon. Today we are going to share with you some measures taken by King Salman to counter current financial crisis in Saudi Arabia.
1-The first step which has been taken by King Salman and his team is to reduce their reliance on the sale of oil. Right now, 90% of the Saudi budget is financed by the sale of oil. The Saudi government has started taking actions to diversify its sources of income by promoting tourism in Saudi Arabia.
Recently, I have visited some hill stations and I was amazed to see so much natural beauty in Saudi Arabia. I was not expecting it at all. If they start promoting their beautiful places to the pilgrims and residents of Saudi Arabia, they would be able to earn so much money out of it.
They can promote people to start tourism companies in Jeddah, Riyadh, Makkah, and Madina to provide packages to visit these beautiful places. Recommended: What are the benefits of converting Umrah Visa into Tourist Visa?
2-A dependent’s fee has been imposed on all expatriate families. Every expatriate living in Saudi Arabia will have to pay SR 100 per month for the year 2017, SR 200 per month for the year 2018, SR 300 per month for the year 2019 and SR 400 per month for the year 2020.
Moreover, currently, employers are paying SR 200 per month for each of its expatriate employees. This amount is expected to increase to SR 400 per month for the year 2018, SR 600 per month for the year 2019 and SR 800 per month for the year 2020.
The Saudi government will raise a heavy amount of money with all these enforcement. Recommended: How much will Saudi Government earn by imposing Dependent’s Fee on expatriates?
3-Saudi Arabia welcomes around 6.5 million Umrah pilgrims, 1.5 million Hajj pilgrims and around 1 million visitors to Saudi Arabia every year. The cost which these visitors had to pay for the visa was negligible.
Saudi Government had been bearing the expenses from its own pocket to facilitate guests of Allah. However, now they have finally transferred a little bit of burden to the pilgrims and visitors by increasing the visa fee for Umrah, Hajj and Visit Visa. It will have a positive impact on the budget of Saudi Arabia.
4-During the year 2018, Saudi Government has imposed 5% Value Added Tax on almost everything. As a result of this, the ultimate consumer will have to pay 5% over and above the normal cost of the product.
Some people might consider it a burden to the general public but for me, it is transferring a little burden to the people to whom the government has been serving. Keep in mind, Saudi residents do not have to pay income tax on salaries and profits.
5-Saudi Arabia is also preparing to launch Initial Public Offer of Aramco in international stock markets. The Aramco is the world’s largest oil company. It is expected that Saudi government will issue only 5% shares in the IPO to raise $100 billion dollars.
Just like bonds, the IPO of Saudi Aramco is also expected to be oversubscribed. It will value the Saudi Aramco at a value of $2 trillion making it the highest valued company in the world. The IPO is expected to be launched somewhere in 2018.
6-Another important step to reduce the burden on the government was to cut down the subsidies from Petrol and Electricity. The Petrol prices have been increased by 100% and Electricity prices by 300% during the year 2018. However, electricity is still subsidized.