Saudi Arabia’s $54 billion haul still leaves it craving cash

Saudi Arabia's Crown Prince Mohammed Bin Salman. (Photo: AFP) (AFP)
Saudi Arabia's Crown Prince Mohammed Bin Salman. (Photo: AFP) (AFP)


The kingdom faces growing bills for planned futuristic megaprojects and an economic overhaul—and narrowing ways to pay for them.

Saudi Arabia has been in a dash for cash.

The kingdom hauled in more than $54 billion this year to fund its massive spending ambitions—equivalent to about 5% of its gross domestic product. It loaded up on debt, sold shares in crown-jewel oil company Aramco and cashed out bets on U.S. tech giants.

Even with the fresh injection of money, however, Saudi Arabia faces increasingly hard fiscal choices, with growing bills for planned futuristic megaprojects and an economic overhaul—and narrowing ways to pay for them.

In all, Saudi Arabia has launched well over $1 trillion of projects under the umbrella of Vision 2030, Crown Prince Mohammed bin Salman’s plan to rapidly pivot the economy away from oil. Faced with limited funds, Saudi officials say they have begun to scale back some of those plans, which face funding gaps of hundreds of billions of dollars.

“Some of the recent transactions will be difficult to repeat," said Tim Callen, a visiting fellow at the Arab Gulf States Institute think tank in Washington.

He believes the Saudis expect oil prices to rise significantly in future years, a risky approach that could mean tough choices, especially if oil falls.

Saudi officials have said they are confident they are on stable fiscal footing—and have plenty of levers to pull to keep funding their investments.

Saudi Finance Minister Mohammed al-Jadaan told CNBC in an interview earlier this year that the deficit’s current size—around 2% of GDP—is at an acceptable level.

“As long as that deficit is going to fuel growth and capital programs and strategies, I think it’s a good deficit, not a bad deficit," he said.

However, Saudi Arabia’s prized asset—its 97% stake in Aramco, formally known as Saudi Arabian Oil Co.—hasn’t proved to be the geyser of spending money once imagined.

Saudi officials initially eyed raising $40 billion to $50 billion by selling additional stock in the company to investors, people familiar with the plans said. But this month it ultimately settled on raising $11.2 billion after bankers scoured the market for demand, selling 0.64% of the company.

While the government’s shares in Aramco have a market value of nearly $1.8 trillion, finding global investors to buy tens of billions of dollars of stock would be difficult at any company. Aramco’s listing on Saudi Arabia’s small stock exchange, where many Western funds don’t operate, makes the task even more challenging.

Aramco stock, meanwhile, has barely budged over the past three years even as the shares of rivals such as Exxon Mobil and Shell are up over 70%.

Raising sums significantly larger than this month’s offering would be difficult in the future, said Craig Coben, a former top investment banker at Bank of America and now managing director at Seda Experts.

“It’s an attractive company—it’s very profitable—but it’s a lot of stock and there are some structural headwinds," Coben said.

Another source of cash also has its limits. In the first three months of the year, Saudi Arabia’s Public Investment Fund, a sovereign fund, sold roughly $15 billion of stock in U.S. companies—much of which was in tech firms—leaving a portfolio worth $20.5 billion as of March, securities filings show.

The sovereign-wealth fund’s other international investments are largely stakes in private companies that would take longer to sell—and investments tied up in private-equity funds that take years to return money.

Fueling concerns is the scale of Vision 2030.

Much of the money is going toward more than two dozen giant real-estate developments and the creation of an entire new region called Neom, where the Saudis are building an arid mountain ski resort and the first phase of what is meant to be a 106-mile-long pair of 1,600-foot skyscrapers called the Line. Many of the biggest projects are just starting to ramp up construction, requiring a surge in spending to finish by 2030.

Just the first 1½-mile chunk of the Line is estimated internally to cost more than $100 billion by 2030, people familiar with the cost have said. That would require the equivalent of more than eight offerings of Aramco stock on the scale completed this month. The Saudis have gradually scaled back Neom’s first phase amid cost pressures, according to former employees on the project.

PIF governor Yasir Al-Rumayyan said at a conference in February that the fund would increase annual spending on domestic projects to about $70 billion, up from $40 billion to $50 billion now.

Other Saudi officials, however, have said the country has shelved unannounced projects and delayed others past 2030 because of funding gaps and to avoid overheating the economy. They have provided little detail about the cutbacks.

The International Monetary Fund said in a review of the Saudi economy and fiscal policy this month that making the changes public “will be important to help provide clarity on government priorities to investors and the public." The review generally gave the kingdom good marks for its economic reforms of recent years.

Over half of the state’s $333 billion budget is funded by oil revenue. Analysts at S&P recently estimated that Saudi Arabia needs oil to reach at least $96 a barrel to balance its budget, a so-called break-even level that has increased with swelling spending. Brent crude oil has been hovering around $82 a barrel.

Meanwhile, Saudi Arabia has been borrowing far more than at any point in recent years, save for a brief period in the pandemic.

The kingdom took on $17 billion in new sovereign debt in the first three months of the year—already hitting its debt target for all of 2024, according to budget documents. It then raised another $5 billion through a sharia-compliant bond offering, known as a sukuk, in May.

Still, the kingdom has imposed its own limits to prevent it from relying too much on borrowing.

The Saudi finance minister recently said the country should keep its debt levels below 40% of GDP—up from a ceiling of 30% instituted before the pandemic. Its debt is the equivalent of 27% of GDP, up from 1.5% a decade ago, a rapid jump to a level still well shy of major Western economies, where levels tend to be well above 60%.

Meanwhile, it has been trying to add debt on state-owned companies and subsidiaries of PIF, which itself has borrowed over $5 billion this year.

Write to Eliot Brown at

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