Saudi Arabia has told banks in the country that it is considering giving contractors IOUs to settle some outstanding bills.
A projected budget deficit this year is prompting the government to weigh alternatives to limit spending. Contractors would receive bond-like instruments to cover the amount they are owed by the state which they could hold until maturity or sell on to banks.
Contractors have received some payments from the government in cash and the rest could come in "I-owe-you" notes."It" may be worse than we are being led to believe. More from the story:
The government started delaying payments last year to prevent the budget deficit from exceeding $100 billion after the oil slump.
Deputy Crown Prince Mohammed bin Salman told Bloomberg News in an interview in March that authorities have started paying companies back.Note: it was back in March, 2016, that it was reported that the Saudibinladin Group was struggling due to low prices (see below).
The picture becomes a bit more clear why Prince Salman needs to launch a Saudi Aramco IPO, albeit, incredibly small.
I track the Salman Plan here.
The big dots that now connect, in the chronological order they appeared:
- *** Saudi's 80-year-old oil minister takes early retirement -- May, 2016
- **** first time ever Saudi sells oil on the spot market -- April, 2016
- ***** Saudi takes out $10 million loan to learn how it's done -- April, 2016
- ***** Saudibinladin Group starts to struggle due to low oil prices -- March, 2016
- emergency OPEC meeting to curtail production; only at last minute did Saudi scuttle plan -- March, 2016
- **** Saudi getting ready to monetize its assets (this was not the Saudi Aramco IPO; this came before talk of an IPO; I noted this as the top international story of the week) -- March, 2016
- ***** the kingdom orders its agencies to cut spending by 5% -- March, 2016
- Saudi Arabia: a failing kingdom -- March, 2016
- social media starts tracking Saudi decline in cash/equity reserves -- February, 2016
- ***** the kingdom confirms it is looking at a Saudi Aramco IPO -- January 31, 2016
- Saudi citizens told to "embrace austerity" as defaults loom -- January, 2016
- ***** the kingdom announces an 8-year delay in huge solar energy program -- May, 2015
- the "trillion-dollar-mistake" -- October, 2014