Skip to content Skip to Search
Skip navigation

Saudi giga-projects may tap into debt market funding

Saudi giga-project Mukaab Riyadh, part of Vision 2030 Balkis Press/Abaca via Reuters Connect
Saudi Arabia's giga-projects such as the Mukaab in Riyadh may need additional funding
  • Bank sector and PIF cannot alone fund Vision 2030
  • S&P Global expects capital markets to play a part
  • Contracts were worth $24.6bn in 2022

Saudi Arabia’s vast pipeline of giga-projects will require funding assistance due to the tightened liquidity in the country’s banking sector, say analysts at credit rating firm S&P Global.

This, they add, opens opportunities for the Gulf’s debt markets.

“We think that the Public Investment Fund and Saudi’s banking sector alone won’t be able to fund all the required investments for Vision 2030 and so it will fall on the debt capital markets to support a large proportion of projects,” said Mohamed Damak, senior director of financial institutions ratings at S&P.

“We expect a lot more debt capital market activity relating to Saudi over the next two to three years.”  

Damak noted that credit growth has outstripped deposit growth, which in turn has reduced the availability of liquidity in the kingdom’s banks.

S&P has forecast that credit growth will slow to 10-12 percent in 2023-2024, owing to higher interest rates and tighter liquidity.

“The massive number of projects looking for long term financing has created more strain for the banks,” Sofia Bensaid, associate director of infrastructure ratings at S&P, said.

“Hence this is translating to higher lending rates on Saudi loans. Therefore, we see the capital markets as extremely important for infrastructure and project finance funding.”

Increased credit demand is being fuelled by the kingdom’s ramping up of activity, in a bid to achieve its Vision 2030 economic diversification goals.

The value of giga-project-related contracts awarded in Saudi Arabia in 2022 grew by 103 percent to $24.6 billion from $12 billion the previous year.

A combined $110 billion worth of contracts are expected to be awarded in the GCC this year, with Saudi Arabia accounting for more than half of the total. The kingdom makes up $64 billion of the combined value, according to Middle East data provider Meed Projects’ 2023 outlook. 

Bensaid added that capital markets are also of increasing importance to Saudi giga-projects and other GCC infrastructure schemes.

“There are a massive number of operational infrastructure projects in the region right now – especially relating to power, water and wastewater treatment plants – that are looking for bond refinancing,” she said, adding that there are at least 15 regional projects that are currently waiting for the right time to go to market.

Latest articles

Dubai South Aldar logistics warehouse

Dubai South and Aldar to work together

The state developer Dubai South and the Abu Dhabi-listed Aldar Properties will jointly develop facilities in Dubai South’s logistics district. The new joint venture will offer build-to-lease and build-to-suit facilities. Aldar will lead the design, development and delivery of the new facilities, starting with a Grade A logistics facility with 24,000sq m of gross floor […]

WTO director general Ngozi Okonjo-Iweala said Iraq and Lebanon both want to resume talks and the organisation will 'try to go as fast as possible'

Iraq and Lebanon face long wait to join WTO

Iraq and Lebanon have indicated a desire to resume talks aimed at joining the World Trade Organization (WTO), but history suggests the two could be in for a long wait. To join the WTO, a government has to bring its economic and trade policies into line with the organisation’s rules and principles and negotiate with […]

DP World's terminal at Dakar in Senegal, one of the countries in the first phase of the decarbonisation project

DP World and Masdar link up for project to decarbonise ports

Two of the UAE’s biggest companies have formed a partnership that aims to decarbonise ports in the Middle East and Africa. Logistics group DP World has signed a three-year agreement with clean energy giant Masdar. Their initial focus will be on ports in Saudi Arabia, Senegal and Egypt. The companies will identify the best sites […]

PIF enlists global banks for second debt market issue

Saudi Arabia’s Public Investment Fund (PIF) has hired banks for its upcoming Shariah-compliant dollar bond, marking its second venture into the bond market this year. The sovereign fund, which manages over $700 billion in assets, has mandated Goldman Sachs, HSBC and Standard Chartered as joint global coordinators, Reuters reported, citing a PIF document. Investor meetings […]