05/18/2016 05:29 EDT | Updated 05/19/2016 11:59 EDT

Saudi Arabia Plans IOUs For Contractors As Oil Takes A Toll On Its Revenue

Saudi Arabia has been hit so hard by falling oil prices that this is how the kingdom plans to pay contractors.

That's right. IOUs. Just like on "The Simpsons." And in "Dumb and Dumber."

Saudi Arabia is considering them as it continues to grapple with low oil prices that have, in many ways, been of their own doing, Bloomberg reported Wednesday.

Low oil prices have made it more difficult for the kingdom to pay suppliers and contractors, as the resource makes up most of its revenue.

So instead, it's offering contractors payment in the form of "IOUs" that work like government bonds. Contractors could sell them to banks, or hold on to them until their value matures, the news agency said.

This all comes one month after Saudi Deputy Crown Prince Mohammed bin Salman threatened to flood the world with oil, thus tanking prices even further.

mohammed bin salman

Saudi Deputy Crown Prince Mohammed bin Salman on Oct. 13, 2015. (Photo: Kenzo Tribouillard/AFP via Getty Images)

Oil prices have fallen dramatically in the past two years thanks to a boom in production from alternative sources like shale oil, and thanks to an increase in Saudi production in an effort to gain market share over its competitors.

Countries that depend on oil, including OPEC members, have urged the Saudi to cut production, but the country has refused to do so unless other players such as Iran do the same.

Iran, meanwhile, doesn't want to lower its own production because it only recently got back into the oil-exports game after international sanctions were lifted in January.


Shaybah, the base for Saudi Aramco's Natural Gas Liquids plant and oil production in the surrounding Shaybah field in Saudi Arabia's remote Empty quarter desert close to the United Arab Emirates, on May 10, 2016. (Photo: Ian Timberlake/AFP via Getty Images)

The resulting lower prices have taken a toll on countries such as Venezuela, which depend on the resource.

But they have also hurt Saudi Arabia, whose credit rating was downgraded by Moody's in response to "lower growth, higher debt levels and smaller domestic and external buffers that leave the Kingdom less well positioned to weather future shocks," Business Insider reported.

The International Monetary Fund (IMF) estimates that the kingdom's debt could grow to 33.4 per cent of its GDP by 2020, according to Zero Hedge.

HSBC, meanwhile, has warned that the kingdom faces a "protracted cycle of stagnation and decay" if it can't implement economic reforms.

And it is skeptical of the Saudis' plan to wean themselves off the resource by selling off part of the Saudi state-owned oil company, and using the money to invest: "We can think of no example of an energy rich economy that has successfully reformed itself after decades of commodity dependence," HSBC said, as reported by Business Insider.

In other words, everyone is feeling the pain — including the people who helped to cause it in the first place.

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