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According to the Central Bank, “the number of contracts benefiting from the payment deferment program since its inception on March 14, 2020 AD to date has exceeded 106 thousand contracts, while the value of deferred payments for those contracts amounted to about 167 billion riyals. The number of contracts benefiting from the secured financing program exceeded 5,282 contracts, with a total financing value of more than 10 billion riyals.

This program is considered one of the programs approved by Saudi Arabia to confront the Corona pandemic, in order to help the private sector deal with the conditions of the closure of the economy and the loss of usual revenues for this business. What is important now is how long these payments will be extended and how will the private sector parties that will be unable to pay them later be dealt with.

The total value of these payments increases every period, as one of the bank officials recently indicated that it has reached 174 billion riyals, which means that it is likely to increase during the coming period, and the bank has not yet stated the way in which it will be dealt with or even what is expected to turn it into bad debts if that happens during current or next year.

Looking at the annual growth rates of non-performing loans and their rates, we note that there are no unusual rates of change, as it was the highest of 50% during the year 2016 AD when the bad debt rate of the total debt increased from 0.4% to 0.6%, and it was the highest for non-performing loans during the year 2018 AD when the total increased from 17.3 billion riyals to 23.7 billion riyals, which means that the impact of the Corona pandemic may still be deferred and there may be more bad debts than usual in the event that the loan extension program stops or those in charge of it decide to manage the program differently and not extend some financing contracts in the program.

This case is no different from the rest of the world, but the question here is: What is the expected bad debt size that will be calculated through the payment deferral program when those in charge of it decide to change their method?