RIYADH (AFP) — Tighter bank financing is delaying Saudi government projects crucial to the growth of the economy, according to a Riyadh industry official.

Saudi banks have been slow in financing companies which the government contracted for projects already budgeted, Said Fahad al Hammadi, head of the contractors committee of the Riyadh Chamber of Commerce, told the AFP.

“The banks are being strict in providing finance for projects, especially infrastructure projects,” he said.

“This tighter financing began in the last few months against the backdrop of the global financial crisis.”

Hammadi also said banks have pushed up interest rates for contractor financing to around 12 percent despite the sharp slide in rates in Saudi Arabia and around the world, and notwithstanding the fact that the projects are supported by guarantees from the Saudi Finance Ministry.

Government spending is crucial to keep the economy of the world’s largest oil exporter going as it feels the pinch from the global downturn and sagging oil prices.

The government has said it plans to spend 450 billion riyals (120 billion dollars) on major projects such as roads, railways and new cities in the next five years.

Saudi officials and some bankers have insisted in recent weeks that the banking sector has adequate funding, but many private sector businessmen are complaining that banks have tightened the spigot for loans.

Last week Saudi Finance Minister Ibrahim al-Assaf said the government would provide more deposits to banks if there was a liquidity problem.