Saudi Arabia's finance ministry has cut advance payments to firms doing construction work for the government to five per cent of the contract value from 20 per cent, a newspaper reported on Wednesday in a fresh sign of a clampdown on state spending.

The ministry has been cutting expenditure and trying to improve efficiency as low oil prices saddle the government with a budget deficit that totalled almost $100 billion last year.

A builder in the kingdom is entitled to an advance payment for certain contracts issued by the government.

This lets the firm move to the construction site, provide early payments to subcontractors and buy equipment from suppliers. The amount is amortised and later deducted from the contract value.

A circular issued by Finance Minister Ibrahim Alassaf reduced advance payments and also specified they should not exceed SR50 million ($13.3 million) each, the Saudi-owned Al Hayat newspaper reported.

A ministry spokesman could not be reached for comment.

Saudi construction firms are already under financial pressure from state spending curbs and rising costs for foreign labour. Abdullah Abdul Mohsin Al Khodari and Sons said on Wednesday it made a net loss of SR1.04 million ($277,000) in the three months to December 31 compared to a profit of SR45.6 million ($12.15 million) a year earlier. - Reuters