Informed sources told Bloomberg that Saudi Arabia is delaying payments to government contractors thanks to the oil price slump.
The country has already entered into a deficit for the first time since 2009, with construction companies waiting six months, or more, for payments on infrastructure projects
The Saudi government is literally out of cash, the sources said, adding that delays have become increasingly frequent while the government has been trying to cut prices on contracts.
“It’s hard to hold back from boosting spending when oil is on the rise, but very hard to cut when oil prices fall,” said Simon Williams, chief economist for central and eastern Europe, the Middle East and North Africa at HSBC Holdings Plc. “Cuts are coming — the budget deficit is too large to ignore and pretend it’s business as usual”, he insisted.
In related news, Iran’s Oil Minister Bijan Namdar Zanganeh has called on OPEC to cut production and push up the price of oil to within the $70 to $80 a barrel range, reported Gulf News.
“No one is happy” with prices at current levels, Zanganeh told reporters in Tehran. “Opec should decide to manage the market by reducing the level of production.”
He added, however, that he doesn’t expect the producer group to decide to scale back output when the OPEC oil ministers meet next in December.