Government building projects held up as banks delay loans and increase interest rates

Saudi government construction projects are being held up by financing issues. Saudi banks are delaying loans to companies that have been contracted to carry out major projects and pushing up interest rates on such loans to 12%.

Many such Saudi contractors are in effect clients, as they employ foreign contractors and consultants to carry out work. Examples include Saudi Bin Laden Group, Saudi Oger and El Seif Engineering Contracting Company.

The tough financing conditions come despite the Saudi Arabian Monetary Agency cutting interest rates to 2% in January, down from 2.5%, and the fact that the projects are backed with guarantees from the Saudi government.

Saudi Arabia will spend $400bn (£275bn) on infrastructure projects in the next five years.