Saudi Finance Ministry has announced cutting the advance payments delivered to firms and contractors assigned to execute the construction works for the government.
The ministry cut the advance payments from 20 percent of the contract value to 5 percent of the contract value, according to a report published in a Saudi newspaper on Wednesday.
The decision is considered a fresh step in the government’s strategy of cutting costs in the wake of the economic crisis composed by oil prices decline.
The ministry has been trying to cut expenditure and ensure work and cost efficiency in an attempt to cover the announced budget deficiency which reached 100 billion dollars last year.
The Saudi Finance Minister Ibrahim Al Assaf stated that advance payment are reduced saying that they won’t exceed by any mean 50 million Saudi riyals, according to the Saudi newspaper Al Hayat.
This ministerial decision is expected to add more weight to the pressure already imposed on construction firms due to the declining governmental spending, rising costs of foreign labor, and decreasing sales value in the market.
Abdullah Abdul-Mohsin Al Khodari & Sons has announced yesterday that it made a net loss of 1.04 billion riyals during the fourth quarter of 2015 compared to a net profit of 45.6 million during the same period of last year.