DAVOS — Saudi Arabia will “ultimately” consider cutting the rate of value-added tax (VAT), which was increased to 15 percent from five percent in 2020, Minister of Finance Mohammed Al-Jadaan said on Tuesday.

The VAT rate was tripled then to shore up finances hit by low oil prices, as the COVID-19 pandemic hit global demand.

Speaking to Reuters on the sidelines of the World Economic Forum in Davos, Al-Jadaan said: “We will ultimately consider cutting the VAT but at the moment we are still replenishing the reserves.”

“Saudi Arabia’s policy on fiscal sustainability would ensure that reserves do not fall below a certain percentage level of the country’s gross domestic product (GDP).”

He revealed that the Kingdom is at final stages of designing its fiscal sustainability policy.

“According to that policy, our reserves shall not fall below a certain percentage level of GDP. That figure would be in the double digits.”

Al-Jadaan said excess money can go toward the Public Investment Fund (PIF), the country’s $600 billion sovereign wealth fund, and the National Development Fund (NDF).

“In the last five years, we have spent SR1 trillion from reserves and we are still replenishing them,” he said.

On Monday, Al-Jadaan expected that the Kingdom would witness 7.4 percent growth in 2022. He also expected that inflation in the country to be around 2.1-2.3 percent by the end of the year. The minister reaffirmed the Kingdom’s determination to continue its reforms vigorously. — SG