Saudi Arabia Raises Import Duty To Offset Plunging Oil Revenues

Saudi Arabia is looking to boost its non-oil revenues while its oil revenue is taking a hit in the low oil prices and is raising customs duties on hundreds of imported products as of June 10.

The Saudis will be lifting import duties on products ranging from meat, dairy, and vegetables to chemicals, vehicles, and building materials. The import fees on those products will be raised by between 0.5 percentage point and 15 percentage points, starting next week.   

The increased import duties are yet another move from the world’s top oil exporter to try to collect more money for its budget at a time when low oil prices are crushing Saudi oil revenues.

However, analysts say that higher import duties will hit consumers at a time when consumer spending and confidence is at a low point due to the economic crisis triggered by the COVID-19 pandemic and the oil price crash, to which the Kingdom itself contributed by waging a price war for market share in March.  

“Any customs rate increase will present an unexpected increase in costs for importers, manufacturers, and those involved in the supply chain, including the final consumers,” KPMG said, commenting on the increased import duties.

Last month, Saudi Arabia said it was tripling its value-added tax (VAT) and suspending cost-of-living allowances as part of a new round of painful austerity measures to save the Kingdom’s finances after oil prices collapsed in the pandemic.

Three weeks after the announcement of these measures, Moody’s changed the outlook on Saudi Arabia to ‘negative’ from ‘stable’, to reflect “increased downside risks to Saudi Arabia's fiscal strength stemming from the severe shock to global oil demand and prices triggered by the coronavirus pandemic, and from the uncertainty regarding the degree to which the government will be able to offset its oil revenue losses and stabilize its debt burden and assets in the medium term.”

By Tsvetana Paraskova for Oilprice.com

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