What this means is simple: as a result of the budget imbalance driven by low oil prices, largely a Saudi doing, the kingdom is forced to give workers an implicit pay cut. It also means that since the government has to "pay" through the issuance of debt, that the liquidity crisis in the kingdom is far worse than many had anticipated.
Which brings up the question of devaluation: how long until the SAR has to follow the Yuan and see a substantial haircut. According to the market, 12 month SAR forward are now trading at a price which implies a 12% devaluation in the coming months.Then Saudis are going to have to pump more oil to pay the bills, even though that means lower prices. The question is whether or how long the Saudis will maintain the the USD/SAR (dollar-riyal) peg.
Saudi Arabia Admits To A Full-Blown Liquidity Crisis: Will Pay Government Contractors With IOUs, Debt
ht Don Quijones at Raging Bull-Shit