Saudis May Pay Contractors With IOUs?

Source: blogs.barrons.com --- Wednesday, May 18, 2016
saudi Deputy Crown Prince Mohammed bin Salman. Agence France-Presse/Getty Images saudiarabia is considering some creative financing to shift debt to banks through the use of bond-like instruments to pay contractors, Bloomberg reports. The small and illiquid iShares MSCI saudiarabia Capped exchange-traded fund ( KSA ) was up 0.5% in recent trading, while the SPDR S&P Emerging Middle East & Africa ETF ( GAF ) was flat. According to the story published this morning, quoting anonymous sources, contractors paid by the state would have to hold these IOUs until maturity, or else would have to sell them to banks. Moody’s Investors Service recent noted that saudi Bank risk is rising due to bad loans and family stakes combined with the low price of oil. More from the Bloomberg 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.” See the Bloomberg story, “saudiarabia Considers Paying Contractors With IOUs ,” and our free recent posts: 3 Geopolitical Oil Risks As saudi Minister Fired, Nigeria Heats Up , saudiarabia: Sweeping Reforms Ready Kingdom for Life After Oil and 10 Emerging Market Must-Reads: Saudis, Brazil, Argentina & Debt . ...