Saudi Austerity Angst Wants to Be Heard Even If No One Listens
Saudi Austerity Angst Wants to Be Heard Even If No One Listens
(Bloomberg) --
Saudis anxious about higher taxes and rising costs found an unexpected outlet but little in the way of feedback at a virtual investor conference.
Hosted by Euromoney, the pre-recorded interview on Thursday with Saudi Finance Minister Mohammed Al-Jadaan was meant to be a forum for him to discuss the government’s economic response to the pandemic for an English-speaking audience of investors and bankers.
Instead, much of the attention focused on frustration over new austerity measures in the kingdom.
The question-and-answer feature of the Zoom event was bombarded with dozens of comments from Saudis about the rising cost of living, along with queries about why the minister hadn’t been speaking Arabic and whether a recent tripling of the value-added tax to 15% would be rolled back.
“Could you please ask our minister if our government will reduce VAT to 5%?” requested one participant, who gave his name as Moath Alfawaz.
Another user, identifying himself only as Moha Otb, said: “Please answer the questions that are important to people. People don’t care about anything but their income.”
The VAT hike -- along with other policy changes that pinched household incomes -- has irked citizens since it was implemented July 1, highlighting the challenges officials face as they try to overhaul the economic model of the world’s largest oil exporter.
Saudi Arabia is grappling with a dual crisis this year as the pandemic combines with lower oil prices to pressure government finances. Al-Jadaan warned in May that “painful” measures could be necessary, but some Saudis argue that inequality is rising and citizens are bearing the brunt of the pain, particularly as the government continues spending on megaprojects and investments abroad.
In a recent survey by market research firm YouGov, 91% of Saudis said the VAT increase had affected their finances, with 61% of those saying the impact had been severe. Prior to the virtual conference, rumors had spread rapidly among Saudis that the finance minister would announce a cancellation or amendment of the tax hike.
But with the interview pre-recorded, there was no chance for the minister to answer the questions that appeared. Instead, they were left to a panel of foreign analysts, who said they thought the higher tax rate was here to stay.
“There has been a lot of hoarding and reaction to the introduction that impacted the inflation,” said Alia Moubayed, managing director and chief Middle East and North Africa economist at Jefferies. “It is very important that people get used to that, and that the government build other policies that could mitigate the impact of higher inflation on the poor.”
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