Saudi contractors still struggling with government payments delays

Contractors in Saudi Arabia are still struggling to be paid on time, despite government assurances that the problem has been resolved, according to reports

Bloomberg reports that current payment delays are not as severe as those seen in 2015 and 2016, when government authorities decided to delay tens of billions of dollars in payments to keep the kingdom’s budget deficit at 15 per cent of GDP, but are still taking months.

The Finance Ministry is said to be honouring a pledge to pay companies on time after launching an electronic payment to monitor payments in January but other departments are taking much longer to process paperwork and send it to the ministry, sources told the new service.

Other delays are linked to the long backlog of payments the government is currently dealing with.

The sources said delays were particularly pronounced for those seeking payments from the Health Ministry.

Companies including Saudi Binladin and Saudi Oger laid off tens of thousands of workers in the 2015-2016 period after being unable to pay their salaries for months due to payment delays.

The government eventually began making payments again towards the end of 2016 after accruing bills with the construction sector alone estimated at SAR80bn ($21.3bn).

Read: Saudi Arabia to settle private sector payments by end of year

Reuters reported last week the Saudi government was setting up a committee to restructure debt owed by Oger after the episode eventually caused it to collapse.

The company is said to be owed government payments in the billions of dollars. Thousands of its former workers are also still awaiting unpaid salaries.

Read: Saudi sets up committee on Saudi Oger debt restructuring

Saudi Binladin has fared better after receiving government loans including around SAR11bn ($2.9bn) last month to pay staff and creditors.

Read: Saudi Binladin receives $3bn loan from government

However, it was at one point on the verge of financial collapse and has fallen behind on a number of major projects after severely cutting its workforce from 100,000 employees at its height.

Read: Saudi’s Binladin appears to have dodged financial collapse, but what next?

The state is expected to take a stake in the company as part of a financial settlement with family members under the kingdom’s anti-corruption crackdown last November.