Saudi Arabia takes steps to revive economic growth stalled by pandemic, oil price crash

Dubai — Saudi Arabia, the world's largest crude exporter, has taken steps to revive economic growth hurt by the COVID-19 pandemic and oil price crash, including making an unprecedented transfer of government funds to the sovereign wealth fund.

The country's economy has been severely hit this year. Saudi Arabia's budget for 2020, announced in December, assumed an oil price of $60/b, and the country's fiscal breakeven price is $80/b, according to the International Monetary Fund. That compares with a front-month Brent crude price of $37.84 at the end of May.

The government made two exceptional payments to the country's Public Investment Fund, its sovereign wealth fund, totaling $40 billion in March and April. They were made due to a noticeable decline in foreign exchange reserves, according to a statement by Minister of Finance Mohammad bin Abdullah al-Jadaan.

Although it was not disclosed how the PIF would deploy the capital, the returns of investments would be made available to support public finances when needed, Jadaan said.

Facebook, Shell

The PIF, which is chaired by Saudi crown prince and de facto leader Mohammed bin Salman, has already deployed at least $8 billion on investments this year, according to filings with the U.S. Securities and Exchange Commission. They include stakes in Facebook, Boeing and oil and gas majors Shell, BP and Total.

The transfer of public funds to the PIF comes as Saudi Arabia is implementing certain austerity measures, including tripling the value added tax to 15% and scrapping a cost of living allowance for public sector workers.

Additionally, the kingdom has embarked on gradually reopening its economy, including lifting a night-time curfew and allowing gatherings of 50 people that were imposed to keep the virus from spreading.

The Saudi government still has measures in place to contain infections, according to a series of statements on the state-backed news service SPA. They include enforcing Riyals 1000 fines to people not wearing masks in public, temperature checks before entering shopping malls and the disinfection of carts and shopping baskets after each use.

The Saudi government last week announced that it intends to resume operations of all domestic flights and airports over a two-week period, beginning May 31. Preparations have been completed at King Abdulaziz International Airport in Riyadh. They include checking on airport visitors with thermal cameras, installing sterilizing devices for stairs, electric walkways with ultraviolet technology and floor stickers and waiting seats to urge social distancing while at the airport. Additionally, aircraft will be sterilized after each flight.

As of May 31, Saudi Arabia reported 83,384 confirmed cases of COVID-19, including 1,618 in the last 24 hours, and 480 deaths.