The measures, which could stir public resentment with the cost of living rising, come as the petro-state steps up emergency plans to slash government spending to deal with the twin economic blow.
“It has been decided the cost of living allowance will be halted from June 2020 and VAT will be raised from 5 percent to 15 percent from July 1,” Mohammed al-Jadaan said in a statement released by the official Saudi Press Agency.
Jadaan insisted the measures were necessary to shore up state finances amid a “sharp decline” in oil revenue as the coronavirus pandemic saps global demand for crude.
The government was also “cancelling, extending or postponing” expenditures for some government agencies and cutting spending on major state projects introduced as part of an ambitious reform programme to diversify the oil-reliant economy, the minister added.
Jadaan last week warned of “painful” and “drastic” steps to deal with the double shock of the novel coronavirus and record low oil prices.
Saudi Arabia, the top crude exporter and the Arab world’s biggest economy, has shut down cinemas and restaurants, halted flights, and suspended the year-round umrah pilgrimage in a bid to contain the deadly virus.
Saudi Arabia, along with other Gulf states, imposed a five percent tax on goods and services in 2018 in a bid to generate additional revenue.
