Saudi wealth fund falls short of planned domestic spend

Saudi Arabia’s Public Investment Fund invested only half of the $40bn it had planned to sink into the domestic economy.

The PIF is the main investor behind hundreds of billions of dollars of new development in Saudi Arabia, ranging from entertainment hubs to tourism to sustainable cities, but progress on many of those projects has been slow [File: Maya Anwar/Bloomberg]

Saudi Arabia’s wealth fund invested only half of the $40 billion it planned to plow into the domestic economy this year to help drive diversification.

The Public Investment Fund has invested 84 billion riyals ($22 billion) during the current year, Crown Prince Mohammed Bin Salman said in a statement after the government issued its budget for next year. The fund would invest more than 150 billion in 2022, he said.

Previously the Crown Prince had said it planned to invest 150 billion riyals or more a year from 2021 to 2025. The fund is now targeting to invest up to 1 trillion riyals inside the kingdom by 2025, Governor Yasir Al-Rumayyan said at an event in Riyadh on Monday.

The fund, which the prince also chairs, is the main investor behind hundreds of billions of dollars of new developments ranging from entertainment hubs to sustainable cities and tourism developments. Yet progress on many of those has been slow. Work on Neom, the crown prince’s signature development, has progressed little further than “earthworks.”

The fund was given an additional $40 billion from the reserves in March 2020 to invest overseas, taking advantage of the crash in markets. It used all that cash to buy stakes in companies including Citigroup Inc., Facebook Inc. and cruise-ship operator Carnival Corp. Just a few months later it had sold most of those holdings. That illustrates how much easier it’s been for the fund to deploy money internationally compared to the nascent diversification projects it focuses on at home.

Pushed into deficit for the past eight years because of a slump in oil prices, the Saudi government has shifted most capital expenditure on development into the PIF, as the wealth fund is known, and another local development fund. The government had said that cuts to central government spending would be counteracted by the PIF’s huge spending plans.

(Updates with new 2025 domestic investment target in third paragraph. An earlier version of this story was corrected to delete a reference to the kingdom’s reserves.)

Source: Bloomberg