As the worst effects of the credit crisis seem to be unwinding in the global financial system, many Gulf companies are left with a problem: how to meet the bills they were obliged to put on hold during the height of the financial troubles.
It is a problem with direct financial consequences for the region’s economies and prospects of recovery. If companies pay up in full and immediately, they risk draining the liquidity that has been slowly building up again in corporate coffers. If they continue to stall on financial obligations, the threat is that their international partners resort to expensive and distracting legal action to recover their dues.
The broader reputational risk is that Gulf companies are branded with a “can’t pay, won’t pay” image that will handicap them moving into recovery.
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