Payments to construction firms will rise – Saudi finance minister

Delays in state payments to construction firms are due to “technical reasons” and the payments will increase in the coming period, Finance Minister Ibrahim Alassaf said on Saudi-owned television network MBC in a programme broadcast on Wednesday.

The construction industry has been hit hard this year by state spending cuts, part of an austerity drive in response to low oil prices, and by months-long delays in the government settling its debts to contractors. Industry executives have said billions of dollars may be involved.

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Alassaf did not describe the technical problems but said payments to companies were now “stable” and would rise. He did not give specific numbers.

The programme was broadcast hours after the Saudi government sold $17.5bn of bonds, the largest emerging market debt sale ever, in its first international bond sale. The bond offer marked a major change of policy for the government; until last year, it focused on cutting public debt.

Alassaf praised the government’s economic plans and austerity drive, saying it had impressed U.S. President Barack Obama among others.

The bond issue prospectus noted that Saudi Arabia might eventually abandon the peg of its riyal currency to the U.S. dollar, but Alassaf said that was included for legal reasons and the government had no intention of changing the exchange rate.

The debt issue did not include Islamic bonds; Alassaf said the government planned to issue sukuk in future as one way to cover its budget deficit, but did not elaborate.

Mohammad al-Tuwaijri, deputy minister of economy and planning, told the programme that Saudi Arabia would have faced bankruptcy in three to four years if it had not imposed austerity policies.

One particularly painful policy, announced last month, was cuts in allowances for public sector employees.

Civil service minister Khalid bin Abdullah al-Araj told the programme that after oil prices recovered, some necessary allowances would be resumed. He did not elaborate.