Saudi Arabia has reportedly made good on $10.7 billion that it owed to private sector companies, according to Arab News, but one construction firm said on Monday that it wrote directly to the Deputy Crown Prince warning it may need to cease operations.
Mohammad Al Mojil Group (MMG) said in a short statement through Saudi Arabia’s stock exchange on Monday that its letter to the prince also addressed constraints imposed by banks and the government, and legal restrictions that were blocking company leaders from speaking publicly about proposed solutions to its problems, Gulf Business reports. The firm did not elaborate on the claims.
Deputy Crown Prince Mohammed bin Salman.
MMG has not been traded on the Saudi Stock Market since 2012, and has struggled to restructure itself in recent years after the Kingdom’s construction boom.
After a sharp reduction in oil revenues, Saudi Arabia has been forced into dramatic spending cuts that included reduced or suspended payments owed to construction firms, medical establishments and even some of the foreign consultants who helped to design its economic reforms, Reuters reports. But no industry has been hit as hard as Saudi Arabia’s construction sector.
In September, Saudi Arabia’s finance ministry resumed payments to Saudi Binladin Group (SBG), the kingdom’s biggest construction firm, for its work on government projects. SBG faced its toughest challenges in the construction giant’s 85 years of operation as tightened government spending and a nearly year-long restriction on new projects in the pipeline greatly undermined the company’s finances. That caused SBG to lay off 77,000 people, or about one-third of its total workforce.
The resulting cash squeeze left it struggling under an estimated $30 billion in debt owed to local and international lenders, “an amount large enough to cause potential stress for the Saudi banking system,” Reuters reports.
