As Saudi Arabia embarks on its ambitious economic transformation plan dubbed ‘Saudi Vision 2030’, it has become clear that oil revenues alone are insufficient to fund the extensive investments that the initiative demands. To propel the diversification of its economy, the Kingdom is turning to the international debt market to support its grandiose projects, including the construction of the hyper-futuristic city of Neom, which comes with a hefty price tag of $500 billion (approximately €461 billion).
With its eye on the ticking clock, Riyadh is ramping up its financial ventures, despite the fact that the oil market is not as robust as needed, with crude trading around $80 a barrel and foreign direct investments lagging behind the anticipated $100 billion per year mark. The Kingdom’s public debt remains relatively low at 26.5% of its GDP in 2023, compared to higher percentages in other countries, providing a cushion for its economic plans.
The nation’s Public Investment Fund (PIF), recognized as the most active fund globally in 2023 by Global SWF, spearheaded 49 acquisitions totaling $31.5 billion—representing one-fourth of all sovereign wealth fund investments that year. Despite its aggressive investment strategy, which has significantly diminished its cash reserves to $15 billion as of September 2023, the PIF has ambitious aspirations to grow its assets to $2 trillion by 2030.
To augment its capital, the PIF has issued bonds valued at $7 billion since the beginning of 2024, and further funding might come from a potential sale of Aramco shares on the Saudi stock market. Additionally, Aramco is looking to issue long-term bonds to refine its capital structure further. The oil giant remains a cornerstone of Saudi Arabia’s economy, and despite a production decrease, it is expected to contribute 60% to the state budget revenues and 30% to the GDP for 2024-2025, according to Fitch Ratings.
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