Saudi Arabia’s Public Investment Fund is the key financier of the Kingdom’s Vision 2030, a national plan that aims to wean the economy off oil, which currently represents around 40% of the country's GDP.
Under its umbrella, the $925bn fund has 96 companies operating in 14 different sectors, including real estate, automotive, mining, renewables, technology, transport and logistics and is pumping major investments into all key business sectors. PIF also has stakes in multinational companies, including Uber, the world’s most famous ride-hailing services provider, and major investment company Blackstone.
However, Saudi Arabia’s domestic agenda is the fund’s top priority, with more than 70% of its investments located in the Kingdom, including the futuristic city of Neom, the future entertainment capital of Qiddiya, and a tourism megaproject in the Red Sea. It will also support gigantic events such as Expo 2030 and the 2034 World Cup.
The fund said its spending in Saudi Arabia is expected to reach $70bn in the coming five years, up from an annual range of $40bn-$50bn—a domestic expansion that will likely come at the expense of the fund’s international endeavours.
Oil predicament
While Vision 2030 aims to diversify the economy away from oil, its budget is largely funded by oil revenues. According to estimates, oil prices should be close to $100 a barrel for Saudi Arabia to sustain its public spending, which is ballooning due to numerous mega projects.
However, an escalating global trade war triggered by US President Donald Trump saw the world’s largest economy and China impose triple-digit tariffs on each other, fueling concerns over an economic slowdown. In April, OPEC+ decided to ramp up oil output by 411,000 barrels per day, starting from next month, a surprisingly large supply increase that came at a time when oil prices were already low. This means that the cost has dropped to $65 a barrel.
This drop in the price of oil has created a financing gap for the Kingdom. In January, the National Debt Management Centre said that Saudi Arabia’s funding needs in 2025 are estimated at 139bn riyals ($37bn). A budget deficit of 57.7bn riyals was registered in the fourth quarter of last year. For his part, Tim Callen, a visiting fellow at the Arab Gulf States Institute in Washington, says he expects PIF to increase borrowing and liquidate some of its assets, in addition to reprioritising its investments to fill the gap.
Bolstering Saudi-US relations
Internationally, PIF’s main task will be to help Saudi Arabia beef up its economic relations with the US—a precursor to an anticipated strategic agreement both countries are edging closer to. In January, Saudi Crown Prince Mohammed bin Salman told Trump that he was willing to expand investment and trade with the US over the next four years by $600bn. The US president, whose relationship with the Saudi Crown Prince has been warm since his first term, later suggested that figure could be rounded up to $1tn.
For his part, PIF Governor Yasir Al-Rumayyan said the fund is poised to channel more of its overseas investments to the US, where 40% of its international assets are already located. “It could be much more,” he said at Miami’s Future Investment Initiative Priority summit.
US-based Scopely Inc., a unit of the PIF’s Savvy Games Group, agreed in March to acquire US software development company Niantic Inc.’s gaming business, including popular mobile game Pokémon Go, for $3.5bn. More similar deals are expected to follow.
However, going forward, the Kingdom will be carefully weighing its priorities between international and domestic investment. With the Vision 2030 deadline approaching in five years, Saudi Arabia will carefully weigh its investment priorities to ensure its grand plan comes to fruition.
