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Saudi Arabia Pushes Austerity To Mitigate Latest Oil Woes

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Saudi Arabia has outlined plans to ramp up its austerity program and avert the threat of national bankruptcy amid a sliding oil price and growing tensions with its regional oil-exporting rival Iran.

In an interview with Bloomberg, deputy crown prince Mohammed bin Salman said the country’s economic reform program would raise an extra $100bn (£70bn) in revenues a year by 2020, tripling income from non-oil sources and balancing the budget.

This would be on top of the austerity program unveiled late last year. The extra revenue, according to officials, would come from measures such as a value-added tax, a tax on expats and a tax on sugary drinks. Incomes, however, would remain untaxed.

The obstruction represents the latest sign that the Saudi proposal of an Opec production freeze is dead in the water. Oil prices fell yesterday, with a barrel of Brent dipping 1.53 per cent to $38.08, as traders’ belief in the likelihood of a freeze evaporated.

In February, Saudi and Russia agreed to support prices by freezing production at January’s levels, but only if other major producers did the same. However, Iran is insisting on its right to hike production back to pre-sanctions levels. Iran’s exports last year fell to 1.1 million barrels a day – half of its pre-sanctions output levels.

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