What's going on?

With coronavirus having left Saudi Arabia�s finances looking somewhat disheveled, the country took matters into its own hands by announcing new austerity measures that cut a little close to the skin.

What does this mean?

Saudi Arabia has more than just coronavirus to worry about: the oil price has fallen by more than 50% since March, impacting the income the country makes from the slippery elixir. So it now plans to find an extra $27 billion, and to use it to support healthcare efforts and troubled businesses. Yep, �find� it � in the pockets of its own citizens.

The $266 monthly living allowance for Saudi Arabia�s 1.2 million government workers will be scrapped from June, and the country�s value-added tax will triple from 5% to 15% in July (tweet this). That�ll make buying goods and services more expensive for everyone, but it’ll help line the government�s pockets in the process.

Why should I care?

For markets: A cut below the rest.

The Saudi Arabian stock market fell 3% on Monday, as investors perhaps worried that higher taxes � and the lost income for government workers � would curb consumer spending. And with government spending on major infrastructure also slowing down, industries like the country�s all-important oil sector will probably suffer an earnings hit too. What�s more, some economists have questioned Saudi Arabia�s wisdom in trying to save money when most other governments are decidedly spending their way out of the crisis.

The bigger picture: A cut ahead of the rest.

With some $8 trillion already committed to the coronavirus response globally, Nervous Nellies and Debbie Downers have started to wonder how it�ll all be paid for. And like it or not, Saudi Arabia has offered an answer: governments might find they�re forced to increase taxes and lower their spending to balance their budgets. That�d make times tough for everyone, sure, but it�d be tougher still for those people and businesses who depend on government programs in their day-to-day lives.