Dubai: Saudi Arabia is repaying debts to contractors after long delays that squeezed company finances and hurt investor sentiment. Stocks gained.

Payments have been “regularised and will rise in the coming period,” Finance Minister Ibrahim Al-Assaf said in a televised interview on MBC Wednesday. While he didn’t offer details, three people familiar with the matter said the government has started paying some major builders as well as companies outside the construction industry.

Some companies were told 30 per cent to 40 per cent of the outstanding dues will be paid before the end of the year, with the remainder to be settled in 2017, two people said. They spoke on condition of anonymity because they’re not authorised to speak publicly.

The world’s biggest oil exporter started delaying payments to contractors last year as it sought to rein in a budget deficit that reached about 15 per cent of gross domestic product. The austerity drive caused the non-oil economy to shrink in the fine three months of 2015 and the first quarter of this year. The country is working to shore up its finances, including through the sale of as much as $17.5 billion (Dh64.27 billion) of dollar bonds.

Economic shake-up:

The news helped the benchmark Tadawul All Share Index climb 1.3 per cent. Real-estate development company Jabal Omar jumped 6.5 per cent, the biggest intra-day gain since October 4.

Saudi daily Okaz reported last month that the government had started to pay dues owed to Saudi Binladin Group, the kingdom’s biggest construction company, citing Abdullah Basodan, adviser to company Chairman Bakr Bin Mohammad Binladin.

The kingdom is undergoing the biggest economic shake-up in its history in an attempt to reduce its reliance on oil. The government aims to generate more than $100 billion in non-oil revenue a year by 2020 through measures including value-added taxation.

The IMF said on Tuesday the pace of austerity could ease “a little” next year, helping non-oil growth recover to 2.6 per cent from 0.3 per cent in 2016.

The fiscal consolidation, however, “needs to continue over the next five years,” Masood Ahmed, head of the IMF Middle East and Central Asia department, said in an interview in Dubai on Wednesday.

— Bloomberg