Saudi Arabia's economic transformation under Prince Mohammed's leadership is marked by ambitious initiatives like the $48 billion property development and global airline establishment. However, cash reserves have dropped significantly, prompting plans for a substantial Saudi Aramco stock sale. Social liberalization measures, including integrating women into the workforce, accompany assertive foreign policies. Gigaprojects like Diriyah and Neom showcase futuristic city planning. The Public Investment Fund's assets surged to $2 trillion, but the government faces a $21 billion budget deficit and increasing debt, necessitating additional fiscal risk. Despite economic challenges, Riyadh aims to raise funds through Aramco stock sales and bond offerings to sustain its transformative vision.
Over the past year, Saudi Arabia has embarked on an array of ambitious spending initiatives, including a $48 billion property development featuring a towering cube, the establishment of a global airline, a partnership with the PGA Tour, and a significant investment in chips and electronics. However, recent reports indicate a significant decrease in cash reserves, dropping by about three-quarters to approximately $15 billion as of September, the lowest since December 2022. To address this, there are plans for another substantial stock sale of Saudi Aramco, the nation’s prized oil company.
Prince Mohammed aims to transform Saudi Arabia into an economically diversified powerhouse, envisioning reshaping the Middle East into “the new Europe.” Recent endeavors include a $35 billion deal with Boeing for jets, with half designated for the new airline, and disruptive moves in professional golf. There are also plans to invest $38 billion in developing an esports and videogame sector and establishing a domestic electric-car manufacturing industry.
Prince Mohammed's de facto leadership over the 36 million people in the country is marked by social liberalization measures, such as integrating women into the workforce, and a more assertive foreign policy. He refers to these initiatives as "gigaprojects," including ventures like New Murabba and the remarkable Neom, a futuristic city planned to accommodate nine million people.
Diriyah, a $62 billion gigaproject in Riyadh, is currently a bustling construction site, while at Neom, teams of excavators are laying the groundwork for its extensive towers. Recently, Neom was allocated $5 billion to construct a dam for a proposed arid mountain ski resort.
The Public Investment Fund (PIF), responsible for managing these projects, has seen a significant increase from its $718 billion valuation as of September, now overseeing $2 trillion in assets. Tim Callen estimates that the government may need to inject an additional $270 billion into PIF by 2030, necessitating assuming more fiscal risk.
Despite substantial spending, Saudi Arabia encountered an unusual economic contraction in 2023, and this year is anticipated to face a budget deficit of $21 billion, approximately 2% of the country’s GDP. The government surprised investors with a $12 billion bond offering in early January, having previously estimated borrowing around $9 billion from international markets throughout 2024. PIF independently issued $5 billion in bonds shortly afterwards.
Saudi Arabia's debt is projected to reach 26% of GDP this year, compared to nearly bottoming out at 1.5% a decade ago. Foreign currency reserves at the Saudi central bank stand at around $400 billion, down from $700 billion in 2015. Riyadh intends to sell 1% of state-owned Aramco to stock market investors to raise approximately $20 billion. PIF emerged as the world’s most active sovereign wealth fund last year, with $32 billion spent across 49 acquisitions and other deals.
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