Giga-projects

Saudi review says 87% of Vision 2030 projects ‘on right track’

May 30, 2024, 10:18 AM

Saudi giga-project Neom recently hosted representatives from 52 financial institutions to showcase investment opportunities and 'explore potential strategic partnerships'

Economic council reviews progress
Hints of further giga-project changes
More budgetary pressure expected

Saudi Arabia’s top economic body discussed the progress of the kingdom’s Vision 2030 plan this week, citing a recent government report that 87 percent of its projects are “on the right track”.

The Council of Economic and Development Affairs, which is headed by Crown Prince Mohammed bin Salman, convened on May 28 in a meeting that hinted at more restructuring of the country’s giga-projects as it manages financial constraints.

The official news agency said unspecified “decisions” were taken after hearing a presentation on the reform programme which reported that the 87 percent were complete or on the right track.

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Analysts speculate that some projects will be pared back or reorganised in light of budget deficits, higher interest rates and a dearth of foreign investment amid announcements from officials that some projects will be stretched out beyond 2030.

James Swanston of Capital Economics in London said the meeting shows that Saudi Arabia’s government and Public Investment Fund (PIF), which owns the giga-projects, are “seriously reconsidering the state of Vision 2030 and how much of their resources they can commit to it”.

This month PIF merged the entertainment company Seven with the Qiddiya giga-project, a sports and entertainment district outside Riyadh.

Neom, a futuristic city in northwest Saudi Arabia, said its horizontal city The Line will open in 2030 at less than 5km long instead of the planned 170km.

Although it is valued at $925 billion, PIF carries the burden of funding $1.25 trillion of projects. Some of this will be alleviated by a planned share sale in state oil giant Aramco next month that could provide at least $10 billion for the wealth fund.

PIF and other entities have continued to tap debt markets without a problem. Last year PIF raised $5.5 billion through its latest green bond issuance following $3.5 billion raised in October 2022. A second sukuk, with a seven-year term, is expected this year.

Extra budgetary pressures could lead the government to squeeze the Vision 2030 projects further, Swanston said.

The International Monetary Fund recently raised its estimate for Saudi Arabia’s fiscal breakeven price to $96.2 per barrel of oil from $86 last year.

PIF saved at least $15 billion by cutting its US equity holdings in the first quarter of the year. Around 27 percent of its assets are outside Saudi Arabia, according to Global SWF, but analysts say more of PIF’s annual spending is set to be local in the coming years.