Zero Hedge — Saudi Arabia Admits To A Full-Blown Liquidity Crisis: Will Pay Government Contractors With IOUs, Debt

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.

Zero Hedge
Saudi Arabia Admits To A Full-Blown Liquidity Crisis: Will Pay Government Contractors With IOUs, Debt

Tyler Durden

ht Don Quijones at Raging Bull-Shit

Saudi's continue to take on dollar loans. How long will they hold the riyal peg?

Saudi's just took on another $10 billion in debt from international banks. While that's small potatoes, it continues to add to a growing pile of foreign debt.

Low oil prices have drained their budget: the Kingdom is now running deficits. They're also maintaining the riyal peg to the dollar at $3.75.

How much cash are they willing to burn to keep maintain this peg? On the one hand they're selling dollars and on the other hand they're borrowing dollars...to sell?

Crazy shit.

I can't wait 'till this country implodes and the people there chop of their motherfucking rulers' heads.