The Scoop
Saudi Arabia has ordered government entities to freeze payments to strategy advisers, management consultants, and law firms, as it weighs the economic impact of the Iran war, according to people familiar with the matter.
The instruction applies to ministries and government-controlled entities including Public Investment Fund (PIF), the kingdom’s nearly $1 trillion sovereign wealth fund, and many of its subsidiaries, the people said. The order was issued earlier this month and currently lasts until the end of June, the people said. The Financial Times reported Thursday that Saudi Arabia had stopped awarding new work to western consultants.
“The Ministry of Finance and the Saudi government have always looked to ensure all investments, including consultancy services, provide clear returns in line with the strategic objectives of Vision 2030,” a spokesperson for the Finance Ministry said in a statement.
The spokesperson disputed that payments were being delayed, saying invoices due “are paid within the contractual time frame,” adding that “year-to-date, more than 85% were made a couple of weeks before the due date, and 99.5% within the contractual timeframe.”
PIF didn’t immediately respond to a request for comment.
The freeze includes work on existing contracts and a halt on hiring consultants for new work, the people said. Some firms affected by the order have continued working despite uncertainty over payments, while others were instructed to finish short-term assignments before pausing new projects, the people said.
Some government bodies have sought exemptions for essential contracts, the people said.
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Saudi Arabia recorded its biggest quarterly deficit since 2018 as the kingdom ramped up spending to offset the effects of the Iran war and a slowing economy. Debt also rose by the most in years as Riyadh tapped domestic lenders to help finance the gap.Saudi Arabia’s Vision 2030 plan has been a bonanza for consultancy firms over the past decade, with the likes of McKinsey and Boston Consulting Group getting large contracts from the government and state-linked entities like NEOM. State-directed spending also encouraged some of the world’s biggest law firms to open regional headquarters in Riyadh and hire dozens of partners.
But the industry’s glory days are fading amid a backlash against consultants extracting giant fees and spiraling project budgets. Last year, PIF barred PwC from receiving new contracts for 12 months.