Saudi Arabia is considering IOUs as method of part payments owed to contractors in the kingdom in order to conserve cash.

The contracting firms would receive bond-like instruments which they could hold until maturity or sell on to banks, according to news agency Bloomberg, which cited people briefed on the matter. Contractors have received some payments in cash and the rest could come in the “I-owe-you” notes, the people said, adding that no decisions have been made on the measures.

One Riyadh-based banking source said that the banks have not been formally notified about IOUs. However, if the contractors receive IOUs from the government, then opts to sell it, the banks which have lent them funds will have the first rights to buy it from the contractors, most likely, at a mutually discounted price. The contractors won’t be able to sell the bonds to other financial institutions without the clearings from the banks which has the first right, the source added.

Saudi Arabia, world’s top oil exporter, which relies mainly on sale of hydrocarbons for revenues, had stopped payments to the contractors late last year, after the oil fell from the mid-2014 peak of more than $110 per barrel. The kingdom tapped foreign reserves and borrowed from local and international banks in response to plug the $86bn budget deficit it is expected run this year.

The delay in payments resulted in severe cash flow issues for the contractors and brought the construction industry to a grinding halt. To save costs, contractors laid off thousands of job, which resulted in violent protests demonstration in Mecca and Jeddah by the unpaid workers. Saudi Binladin Group (SBG), alone say 70,000 job cuts in recent months and the firm had to borrow SR2.5bn ($667m) from banks to clear the dues of workers and regularise salaries, MEED reported on 8 May.

The government ministries have now started releasing partial payments to construction companies such as SBG and Oger. The Ministry of Health is paying SR20bn of backlog, according to 9 May reported by MEED.

The Saudi government owes approximately $40bn to the country’s contractors, Bloomberg cited Jaap Meijer, managing director of research at Dubai-based Arqaam Capital as saying, who added that IOUs would make sense and would help contractors get back on track. “Banks, however, would be more interested if it were a floating rate.”

Banking sources in March told MEED that the government plans to release $48bn it owes to contracting firms in the kingdom in 2016, to ease pressure on the construction sector.

These payments constitute a major part of the total amount Riyadh has withheld since last year. The government still has an estimated $10bn backlog on top of the payments due to be released in 2016, according to banking sources.