PIF spending to hit $70bn a year early, says IMF

• $30bn increase on 2024
• Budgets ‘may be underspent’
• Call for transparency

Saudi Arabia’s Public Investment Fund will raise its annual spending to $70 billion in 2025, a year earlier than previously announced, according to an International Monetary Fund official. 

PIF’s governor Yasir Al-Rumayyan told a Saudi investment summit in February that the sovereign wealth fund would increase its annual capital spending from around $50 billion a year to $70 billion from 2026. 

But in comments made in Washington to discuss the IMF’s latest Saudi Arabia report, the IMF’s assistant director Amine Mati said PIF’s investments would rise from $40 billion to $70 billion by 2025. 

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The state-owned PIF has been forced to delay some of its giga-projects because of lower-than-expected oil revenues and foreign direct investment over the past year. 

James Swanston, an economist with the London-based Capital Economics, said the sharp rise showed PIF had succeeded in accumulating cash despite the blow to government revenue streams, which will see at least three years of budget deficits. 

PIF also appears to have underspent its initial budgeting for the projects, which have been valued at more than $1.25 trillion, he said.  

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“It could be that now they have greater resources and more emphasis to allocate assets domestically and that is why there is such a large uptick set for 2025,” Swanston said.

In 2021 PIF set targets of $39 billion annual spending on projects and assets under management of $1 trillion by 2025. It currently has $978 billion of assets, according to the data tracker Global SWF, making it one of the world’s biggest sovereign wealth funds.

It saved at least $15 billion by divesting from US equities this year and in March the government doubled PIF’s stake in the state oil giant Aramco to 16 percent.  

PIF’s bullish spending plans align with an IMF forecast of a 4.7 percent rise in Saudi GDP next year, although the economy is still contracting.

Oil prices, at around $73 per barrel, are currently below the IMF’s prediction of an average $82.5 per barrel for 2024, according to its recent report. 

Transparency call

The report said PIF’s role as an extra-budgetary state entity with “interventions in various sectors of the economy” calls for more transparency and monitoring of its activities. 

PIF’s role in executing capital spending “complicates the assessment of the fiscal stance and the monitoring of spending plans,” it said. 

AGBI columnist Dr Nasser Saidi, a former Lebanese economy minister, said that in the future PIF may become more like Temasek, Singapore’s public wealth fund, and appoint itself responsible for improving the management, performance and productivity of Saudi Arabia’s vast public assets, including infrastructure and commercial assets. 

“If Saudi Arabia were to adopt a robust public investment management framework it would increase its financial returns, maximise the value of its public assets, improve productivity growth and support fiscal sustainability,” he said.