In the midst of a global crisis, some good news
Like millions who are still working from home these days, you are either glued to your laptop trying to video conference your colleagues and clients or glued to the TV screen trying to stay updated on this coronavirus health war, which I call World War III.
Last Friday, as bad news poured in from around the world, it was so refreshing and uplifting to watch the press conference on Saudi Arabia’s main channel with Finance Minister Mohammed Al-Jadaan. The minister announced the government’s stimulus package, amounting to SR120 billion ($32 billion), to support the private sector during these difficult times.
This is a decisive and unprecedented move by the Saudi government to preempt and combat the negative financial impact of the global economic shutdown provoked by the pandemic. This stimulus package will ensure the availability of immediate financial resources to the private sector, especially small and medium enterprises (SMEs), so that they may carry on as usual until this crisis is over.
The financial stimulus comprises two parts. The first amounts to SR70 billion ($18.63 billion) and aims to provide exemptions from and postponements of government fees, thus enabling SMEs to manage their daily activities. These exemptions include fees related to visas, to the General Authority for Zakat and Tax, to customs duties, to municipalities and to other governmental entities. In addition, the government, via specific agencies and committees, will provide financial support to SMEs to support their vital working capital requirements. The second part of the stimulus package amounts to around SR50 billion and aims to support the financial services sector.
In my opinion, this stimulus package, which was announced in a speedy fashion and before other G20 countries announced similar plans, is a reflection of the Saudi leadership and the financial strength of the economy.
The government has considerable ability to diversify sources of financing between public debt and government reserves in order to adequately tackle this short-term crisis. Furthermore, it is the intention of the government to review its budget allocation in order to optimize its efficiency during this period.
This stimulus package is a positive and timely intervention. It also limits any negative impact on the government’s goals in maintaining fiscal sustainability and economic development in the long term leading to the Kingdom’s Vision 2030.
Basil M.K. Al-Ghalayini is the chairman and CEO of BMG Financial Group.