Riyadh plans to clear all the government payments owed to private sector firms before the end of 2016.
The plans were approved during a meeting of the Council of Economic and Development Affairs (CEDA), chaired by Deputy Crown Prince Mohammed bin Salman al-Saud in Riyadh on 7 November, according to the Saudi Press Agency.
The move comes one week after Saudi Arabia removed its finance minister, Ibrahim bin Abdulaziz al-Assaf, in a royal decree, replacing him with Mohammed bin Abdullah bin Abdulaziz al-Jadaan.
Payments to contractors working in Saudi Arabia have been increasingly delayed as the government has been forced to cut spending as the price of oil, the main source of revenue for the kingdom, slumped more than 50 per cent from a mid-2014 peak of $115 a barrel.
Contractors have subsequently cut tens of thousands of jobs and stopped paying wages, which created a labour market crisis and attracted criticism from foreign governments.