UPDATE 2-Official retracts statement that Mecca's metro project delayed

(Updates with official retracting comments)

DUBAI, May 25 (Reuters) - A $16.5 billion metro railway project planned for Saudi Arabia’s holy city of Mecca has been delayed so that its financing can be restructured, an official said on Wednesday, but he later retracted the statement.

Ali Abdelfattah, chief executive-designate of the Saudi government’s Mecca Mass Rail Transit (MMRT), initially told a construction industry conference in Dubai: “The reason for the delay is some restructuring financially”.

He said that while work on privately funded schemes was largely unaffected in Saudi Arabia, all government-funded projects were going through some sort of restructuring or replanning.

New budgeting constraints have caused changes to the Mecca plan such as modifications to the design of the metro stations, Abdelfattah said.

However, Abdelfattah later told Saudi-owned Al Arabiya television that the project was progressing well and that there was no delay.

“Of course I deny completely what was said and all that was written and the hashtags and the WhatsApp, none of which is correct,” he said. “My remarks were recorded at the conference and this was a technical conference, not a political conference.”

Abdelfattah declined to comment further when contacted by Reuters.

The Mecca plan includes building 182 kilometres (114 miles) of track and 88 stations, according to an October 2015 document from MMRT, as well as a bus network. It was due to be completed in six phases over about 20 years. Major contracts for the project have not yet been awarded.

Saudi Arabia has been slowing up on infrastructure development projects and paring back state spending as it grapples with the economic effects of two years of depressed oil prices, but some of the cuts are politically sensitive and government officials have often declined to discuss specifics. (Reporting by Matt Smith; Writing by David French; Editing by Andrew Torchia, Greg Mahlich)