While the regime tries to justify stripping back on the livelihoods of Saudi citizens, it could worsen pre-existing societal tensions.
Saudi Arabia has implemented harsh price hikes and spending cuts as the Kingdom faces a huge economic downturn from the Coronavirus pandemic.
The Value Added Tax (VAT) increased from 5 percent to 15 percent on July 1, with consumers rushing to malls and shopping centres to stock up on goods before the price hike.
Saudi Arabia also increased petrol prices by 34 percent in July, triggering opposition from some residents. Gasoline 91 increased from 0.98 riyals ($0.26) to 1.29 riyals ($0.34), while Gasoline 95 rose from 1.18 riyals ($0.32) to 1.44 riyals ($0.38).
One Saudi social media user said the frequent taxation of people does not create a solid economy, but rather increases discontent, anger and outrage.
Meanwhile, Saudi Arabia ended a vital economic assistance program called the “Citizens Account” for two million people, which averages 930 riyals ($245) per family, just as these other crippling austerity measures are rolled out.
“It feels like death,” Bandar Awad, a 34-year-old courier said after losing his monthly stipend. “Even recharging my cell-phone credit has become difficult.”
Despite these drastic policies, which pro-government commentators defend as an “economic necessity,” Riyadh has pursued lavish spending sprees.
From its faltering attempt to buy English Premier League Football Club, Newcastle United, to purchasing more weapons to be used in the already costly war with Yemen, there has also been an announcement launching a $20 billion culture and tourism project in the capital Riyadh.
Saudi citizens may not look kindly on such moves. The regime continues to justify stripping back on livelihoods, all the while risking yet more societal tensions.
Growing social unrest
“Among certain demographics in the kingdom, grievances are on the rise, which ultimately leads to dissent,” Dr. Andreas Krieg, Assistant Professor at King’s College London, told me.
He says this will be felt particularly in areas where reforms are "less appreciated and cannot counterweight the grievances" such as in rural areas and more conservative constituencies.
“These communities are less integrated into the economy and will feel the socio-economic fallout of COVID-19 more harshly than those in the urban middle class.”
Following the downsizing of the 2020 Hajj pilgrimage, one of the five pillars of Islam, along with the monitoring of prayer times, and restrictions to Umrah, the ‘minor’ Islamic pilgrimage to Mecca and Medina, there is a risk of further discontent among the kingdom’s ultra-conservatives.
Saudi Crown Prince Mohammed bin Salman has grappled with this part of society in his ‘reformist’ Vision 2030 plans, intending to diversify Saudi Arabia’s economy away from its oil dependency.
“Another demographic are Shiites in the Eastern provinces who have traditionally felt marginalized in the kingdom, despite generating most of its revenue,” added Dr. Krieg.
“Many feel that the Saudi patrimonial networks still disproportionately benefit from the country’s hydrocarbon wealth and that the Saudi family is shielded against the fallout of this crisis in comparison with other parts of society.”
“So here we see sectarian grievances merged with socio-economic ones. All of this is a dangerous cocktail for social unrest.”
Adding to its previously uncertain economy, Riyadh faced further troubles after prices of oil sank to unprecedented lows in April - it makes up 50 percent of its gross domestic product and 70 percent of its global exports. The loss of revenue from Hajj, previously tipped to overtake oil income as the kingdom’s primary money-maker, is another blow.
On Wednesday, the Saudi finance ministry announced a $29 billion deficit for the second quarter of 2020, with oil revenues falling 49 percent year-on-year to $25.5 billion, while total revenues dropped 49 percent to nearly $36 billion.
The International Monetary Fund (IMF) forecast in July that Saudi Arabia’s economy would shrink 6.8 percent this year, signalling hard times ahead for the Saudi economy. Riyadh has tried to downplay this forecast.
While economists say these reforms will not necessarily help with recovery, more slashing of the public sector is anticipated. Saudi Finance Minister, Mohammed Al Jadaan, previously warned of further cuts later this year, meaning MBS could, in theory, push the costs of the Coronavirus pandemic onto the people.
Could protests erupt?
With the inevitable long-term economic damage from the Coronavirus pandemic, and the loss of financial privileges to Saudi citizens, whom Riyadh has traditionally placated with its wealth, protests and new opposition politics could emerge.
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