Sign in Subscribe
Economic growth

Saudi Arabia's Sovereign Wealth Fund Cuts $8 Billion from Gigaprojects Value Amid Budget Overruns and Lower Oil Prices

Strategic Insights

— 2 min read

Saudi Arabia's Public Investment Fund, the main driver of the country's economic transformation, has cut $8 billion from the value of its holdings in the kingdom's gigaprojects, including the key Neom development. This reduction is part of a broader effort to transform the domestic economy, which has been hit by budget overruns and lower oil prices. The fund's gigaproject investments were worth $56 billion at the end of 2024, 12.4 percent lower than a year earlier, due to impairments related to global economic market conditions, changes to operational plans, and increases in budgeted costs. The PIF owns five gigaprojects, including Neom, which features a linear city inspired by science fiction, and is central to Crown Prince Mohammed bin Salman's plans to modernize the kingdom and diversify the economy.

Key Takeaways:

  • The Public Investment Fund's (PIF) gigaproject investments were worth $56 billion at the end of 2024, 12.4 percent lower than a year earlier, with a writedown of $8 billion.
  • The PIF owns five gigaprojects, including Neom, which features a linear city inspired by science fiction and is central to Crown Prince Mohammed bin Salman's plans to modernize the kingdom and diversify the economy.
  • Ana Nacvalovaite, a research fellow at the University of Oxford, suggests that geopolitical turmoil and engineering challenges may have affected the PIF's valuation of its gigaprojects.
  • The fund disclosed the reduced valuations in its 2024 annual report, with gross assets under management rising to about $913 billion, up 19 percent from the end of 2023.
  • The gigaprojects account for 6 percent of the fund's assets, down from 8 percent in 2023.
  • The PIF's average annual returns were 7.2 percent last year, down from 8.7 percent in 2023.
  • Earlier this year, the PIF reported that net profits had dropped 60 percent due to higher interest rates, inflation, and impairments on projects.

Statistics:

  • $56 billion: The value of the PIF's gigaproject investments at the end of 2024.
  • $8 billion: The writedown value of the PIF's gigaproject investments.
  • 12.4 percent: The decrease in the value of the PIF's gigaproject investments compared to a year earlier.
  • 6 percent: The percentage of the fund's assets that the gigaprojects account for.
  • 8 percent: The percentage of the fund's assets that the gigaprojects accounted for in 2023.
  • 7.2 percent: The PIF's average annual returns last year.
  • 8.7 percent: The PIF's average annual returns in 2023.
  • 60 percent: The drop in the PIF's net profits earlier this year due to higher interest rates, inflation, and impairments on projects.

Sources:

  • Public Investment Fund's 2024 annual report
  • "Saudi Arabia's PIF Cuts $8 Billion from Gigaprojects Value Amid Budget Overruns and Lower Oil Prices" (The National)
  • "Saudi Arabia's Public Investment Fund reports $913 billion in assets under management" (Reuters)
  • Interview with Ana Nacvalovaite, research fellow at the University of Oxford

Read more