Saudi Arabia is repaying debts to contractors after long delays that squeezed company finances and hurt investor sentiment.
Finance Minister Ibrahim Al-Assaf said in a televised interview on MBC Wednesday that payments have been “regularized and will rise in the coming period.” While he didn’t offer details, three people familiar with the matter said the government has started paying some major builders as well as companies outside the construction industry.
Some companies were told 30 to 40 percent of the outstanding dues will be paid before the end of the year, with the remainder to be settled in 2017, two people said. They all spoke on condition of anonymity because they’re not authorized to speak publicly.
The world’s biggest oil exporter started delaying payments to contractors last year as it sought to rein in a budget deficit that reached about 15 percent of gross domestic product. The austerity drive caused the non-oil economy to shrink in the fine three months of 2015 and the first quarter of this year. The country is working to shore up its finances, including through the sale of as much as $17.5 billion of dollar bonds.
Saudi daily Okaz reported last month that the government had started to pay dues owed to Saudi Binladin Group, the kingdom’s biggest construction company, citing Abdullah Basodan, adviser to company Chairman Bakr bin Mohammed Binladin.
The kingdom is undergoing the biggest economic shakeup in its history in an attempt to reduce its reliance on oil. The government aims to raise more than $100 billion in non-oil revenue a year by 2020, through measures including value-added taxation.
The IMF said on Tuesday the pace of austerity could ease “a little” next year, helping non-oil growth recover to 2.6 percent from 0.3 percent in 2016.
The fiscal consolidation, however, “needs to continue over the next five years,” Masood Ahmed, head of the IMF Middle East and Central Asia department, said in an interview in Dubai.
The austerity has hurt investor sentiment. The benchmark Tadawul All Share Index has dropped 29 percent over the past 12 months, the worst performer among more than 90 gauge tracked by Bloomberg globally.