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Saudi Arabia: Just how deep are its troubles?

Frank Gardner
BBC security correspondent
AFP Economic conference delegate in front of a portrait of Saudi Crown Prince Mohammed bin Salman in Riyadh (file photo)AFP
Saudi Arabia has gone through radical change in a short space of time under Mohammed Bin Salman

Once famous for being tax-free, Saudi Arabia has announced it is trebling its Value Added Tax (VAT) from 5% to 15% and cancelling the monthly living subsidy from next month.

The moves come as global oil prices have crashed down to less than half what they were a year ago, slashing government revenues by 22% and putting major projects on hold.

Saudi Aramco, the state oil company, has already seen its net profit fall by 25% in the first quarter of this year, mainly due to the collapse in crude oil prices.

"These measures reflect a drastic need to rein in spending and to try to stabilise weak oil prices," says Gulf analyst Michael Stephens. "The Kingdom's economy is in a terrible state and it will take some time to recover any sense of normality."

AFP Man filling his car at petrol station in Riyadh (file photo)AFP
The cost of living In Saudi Arabia has grown, while oil revenues have fallen

Covid-19 is currently wreaking havoc with an economy that depends in large part on millions of unskilled expatriate workers from Asia, many of whom live in crowded, unsanitary conditions.

Meanwhile the crown prince, while still largely popular at home, remains something of a pariah in the West due to lingering suspicions over his alleged role in the killing of Saudi journalist Jamal Khashoggi.

International investment confidence has never fully recovered from his grisly murder and dismemberment by government agents inside the Saudi Consulate in Istanbul in 2018.

Mohammed bin Salman is asked: "Did you order the murder of Jamal Khashoggi":[]}