Muhammad al-Jadaan, the designated Saudi Minister of Finance and Minister of Economy, explained on Saturday the repercussions of the new Corona virus, or what has come to be known as "Covid-19", and the sharp drop in oil prices on the economy in the Kingdom.
This came in an interview with Al-Jadaan on Al-Arabiya TV, and it was reported by the official Saudi News Agency. Below we show you the most important things he said:
1- The government decided to cut some of the spending, but so far it is not enough. It decided to borrow more than what was planned, as the plan was 120 billion riyals, but now we will borrow more than that by an additional 100 billion riyals, indicating that this also is not enough to bridge The deficit, indicating that it is very important to look at the list of expenditures in the budget and choose from them the least harmful and most effective for the economy and for the benefit of citizens and the basic services they provide .. According to the plan that was announced, we will borrow this year to the limits of 220 billion according to the market situation and the available liquidity.
2- The revenues decreased very significantly and most likely their effect will appear in the coming quarters, whether in oil revenues. He said: “We have started the year in oil prices above $ 60 a barrel, and we see these days numbers up to 20 and this big drop leads to lower revenues in more than Half, as well as non-oil revenues and as a result of precautionary measures, the pace of economic activity is greatly reduced, and therefore non-oil revenues are reduced and we deal with it wisely and efficiently. God willing, the government is looking at a very large group of options before it to deal with a pandemic that the world has not witnessed for more than 7 Almost 0 years from World War II and to this day the world has not witnessed such a pandemic.
3 - It is not possible to predict with regard to oil prices, as it is a matter driven by supply and demand, and oil markets are the ones that determine the price, indicating that the major shocks in the global economy with respect to demand for basic materials, including oil, pressures heavily on the level of demand, and thus on oil prices, It is expected that the economic shock will continue for a period of not long, and the economic situation in the world is fragile, indicating the importance of planning for the worse and we take things seriously so that we can continue to provide basic services to citizens and manage and operate the government for years to come in the event, God forbid, the crisis lasted for a long time.
4- The first quarter and its results do not show the impact of the pandemic very significantly, as the precautionary measures taken by the government and the resulting effects are very large on the economy and public finances, indicating that in most cases their results will appear on the second, third and fourth quarters according to the developments of the health and economic situation.
5- The Kingdom has taken measures to reduce expenditures, due to the large decrease in revenues, and it is expected that the decline will continue over this year and next year .. Expenditures must be reduced and part of it redirected to provide health services to citizens and residents, and to face the effects of a very large revenue shock.
6- Revenues have decreased very significantly, and economists and even health and epidemiologists have not yet been able to clearly predict the duration of this pandemic and its very severe economic effects that we are witnessing, and therefore we must be ready to face the continuation of this crisis, and we have the financial capacity to the extent possible to provide basic services Citizens, and therefore we must reduce sharply from budget expenditures, and consider very large and wide options, both in terms of projects and non-projects and other expenses.
7- Liquidity in the banking sector is available in a very large way, as seen in the reports of international financial institutions, and we have no challenge in banking liquidity and the Saudi Arabian Monetary Agency, banks, and are able to manage liquidity and provide the needs of the private sector, and the government is very keen through the debt management center The year is the non-competition of the private sector, and the continuation of internal and external issues, according to the market situation and the cost of debt.