Saudi Arabia is considering using IOUs to pay outstanding bills with contractors and conserve cash, according to people briefed on the discussions.

As payment from the state, contractors would receive bond-like instruments which they could hold until maturity or sell on to banks, the people said, asking not to be identified because the information is private. Companies have received some payments in cash and the rest could come in the "I-owe-you" notes, the people said, adding that no decisions have been made on the measures.

Saudi Arabia has slowed payments to contractors and suppliers, tapped foreign reserves and borrowed from local andinternational banks in response to the decline in crude oil, which accounts for the bulk of its revenue. The country will probably post a budget deficit of about 13.5 percent of economic output this year, according to International Monetary Fund estimates, pushing the government to borrow an estimated 120 billion riyals ($32 billion).