Saudi Arabia’s ambitious giga projects face financial headwinds

Saudi Arabia’s sovereign wealth fund cut the value of giga projects on its books by $8 billion last year, highlighting the challenges facing the kingdom as it races to diversify away from oil, reports Bloomberg.

The report, titled ‘Saudi Fund’s $8 Billion Hit Spotlights Giga-Project Struggles’ and published on Wednesday, says that the Public Investment Fund (PIF) valued giga projects on its books at 241 billion riyal ($64.2 billion) as of the end of 2024, more than 12 per cent lower than the previous year. Annualised returns since 2017 fell to 7.2 per cent from 8.7 per cent a year earlier.

Still, overall assets under management rose 19 per cent to $913 billion, solidifying the PIF’s position as one of the world’s biggest state-backed investors. It recently raised its 2030 target for assets to $2.67 trillion, up from a previous goal of $1.87 trillion.

The fund’s assets were boosted by a nearly 60 per cent surge in the value of its Saudi equity holdings, which rose to about $330 billion. However, its international capital markets program declined by nearly 32 per cent to around $35 billion.

PIF helms Saudi Arabia’s Vision 2030 plan, which includes dozens of mega projects such as Neom in the kingdom’s northwest. That mission is becoming more challenging as the government runs fiscal deficits and reins in spending amid lower oil prices. Earlier this year, the PIF said its net profit fell by more than half, hurt by high rates, inflation and impairments on some projects, Bloomberg adds.

The fund, chaired by Crown Prince Mohammed bin Salman, deployed nearly $57 billion across priority sectors last year, it said in the statement. International investments made up 17 per cent of its portfolio, down from around a fifth of total holdings last year. That’s in line with PIF’s previously stated plan to reduce the share of global investments, though it has stressed that the absolute dollar value of overseas deals is expected to grow.

The fund diversified its funding sources last year, raising $9.83 billion in public debt and an additional $7 billion in private debt, according to the statement. Still, cash and cash equivalents at the end of the year dropped 5.0 per cent to around $60 billion, the report added.