Saudi Arabia replenishes decline in reserves, to study lowering VAT: Al-Jadaan

Mohammed Al-Jadaan, Minister of Finance

Saudi Arabia is in final stages to develop its financial policy on fiscal sustainability, which would ensure that reserves do not fall below a certain percentage level of the country's gross domestic product (GDP), Reuters reported, citing Mohammed Al-Jadaan, Minister of Finance.

The fiscal sustainability program aims to decouple economy from oil price volatility, which ensures several economic gains for the non-oil economy and the private sector.

“According to that policy, our reserves shall not fall below a certain percentage level of GDP. That figure would be in the double digits,” Al-Jadaan noted on the sidelines of Davos.

"In the last five years, we have spent a trillion riyal from reserves and we are still replenishing them," he said.

Surplus funds may be directed to the Public Investment Fund (PIF) and the National Development Fund (NDF).

Al-Jadaan added that Saudi Arabia will "ultimately" consider cutting value-added tax (VAT), which was increased to 15% in 2020.

Foreign reserves shrank from a record high of $737 billion in August 2014 to $529 billion at the end of 2016 as the government liquidated some assets to cover the huge budget deficit caused by the fall in oil prices.

The Saudi central bank's net foreign assets stood at 1.63 trillion riyals ($435 billion) at the end of March.