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New budget is a breath of fresh air
This column appeared in Arab News on Jan. 03, 2016:
By Rasheed Abou-Alsamh
The new Saudi budget approved and announced last week by the Cabinet is a breath of fresh air in that it addresses the budget shortfalls in intelligent and must-needed ways.
Announcing an immediate 40 percent to 50 percent rise in fuel prices was something long overdue since we have had some of the cheapest gasoline in the world for many years. With the barrel of oil at less than $40 a barrel and our government spending needing at least a price of $90 a barrel to balance our accounts, something had to give.
Our electricity and water rates are also being readjusted upward starting Jan. 11. These rises are also long overdue. Our cheap water and power rates have meant that many Saudis have wasted both by leaving their lights and air-conditioning on the whole day, even when they were not home! This wastage of our resources is sinful and should be stopped. Hopefully, the rate rises will make those who are wasteful more appreciative of our resources, which are not infinite.
Those of us who have lived abroad and have paid much more for our utilities have learned the value of these utilities and have learned how to be thrifty, turning off lights when not using them and not leaving the tap running when shaving or washing the dishes. These are simple behavioral adjustments that any human being can learn.
The introduction of a value-added tax that the Kingdom along with other Gulf Cooperation Council states are planning to introduce perhaps by next year, is also a very good move to raise income for our respective governments. This obviously would be like a sales-tax added to the cost of services and goods, except for food and other essential items. The Kingdom is also going to raise taxes on tobacco and sugary drinks, which is excellent news. There are far too many young smokers in our country, fueled in part by very cheap cigarettes. In the UK and the US, cigarettes are taxed heavily in an official effort to discourage smoking. In New York City a pack of cigarettes can cost $15 because of the taxes. Can you imagine our youth having to pay SR56 for a single pack of cigarettes? Many would stop smoking overnight. Of course, I do not think our taxes on tobacco will initially be as high as that, but I do hope the tax is significant enough to make a sizeable portion of our population reconsider their smoking habits.
Some foreign commentators have been quick to ring the death knell for the Kingdom because of the new budget, calling it austerity-driven. Obviously these people are keen to rush to these conclusions because of ill-will toward us. But they seem to have forgotten that the country has more than $600 billion in foreign reserves, and that we have gone through low oil prices before in the early 1990s, when the barrel of oil hit a low of $20. We survived that and will, God willing, survive this downturn again.
The new budget for sure has seen come cutbacks in spending on the crucial education and health sectors, but nothing very drastic. I was looking at the budgets for our state universities and was surprised that so much was being allocated for each. King Saud University in Riyadh was allocated more than SR5 billion in the new budget, while King Abdulaziz University in Jeddah got more than SR4 billion. Quality education is expensive.
As good citizens we have to do our part to help our leaders balance the books. We cannot expect the state to keep giving us everything we need for free. This is unrealistic and will bankrupt any society that tries to do so. But we also cannot forget the poorer Saudis and the difficulties they will face with higher prices and the inflation that they are sure to bring. The government has assured the public that measures will be put into place to protect them. I hope they will be enough to protect the truly disadvantaged, and that those of us with the means pay our share of these new fees and taxes in order to make a better country for all Saudis.