Saudi Arabia’s megaprojects are so expensive that even the country’s oil wealth may not be enough to realize them

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Saudi Arabia is borrowing to finance a number of ambitious projects, including the $500 billion futuristic desert city of Neom.

According to the project of the ambitious ruler Mohammed bin Salman – Vision 2030 (“Vision 2030”), Saudi Arabia should diversify its economy and move away from fossil fuels. The idea of ​​the country is to become a global center for technology and innovation.

The Saudi sovereign fund, the Public Investment Fund, provides financing for “gigaprojects” that are estimated at tens of billions of dollars, writes Business Insider.

However, the fund’s finances have been depleted to their lowest level since December 2020, with about $15 billion on hand, according to The Wall Street Journal.

The kingdom is leaning on loans for the first time in years to boost its funds as well as sell more shares in state oil company Aramco, according to the report, cited by the media.

“It’s mind-boggling how many projects are planned to be done here,” said Tim Cullen of the Gulf Arab Institute think tank in Washington.

Futuristic Neom in Saudi Arabia’s desert, which could turn from a $1 trillion ‘utopian’ city into a nightmare

The first part of the utopian city to be completed is Sindala Island

He said Saudi Arabia would likely need another $270 billion for the Public Investment Fund by 2030. That would likely require additional borrowing, as well as eating into foreign currency reserves used to peg the Saudi riyal to the dollar.

As part of Vision 2030, Saudi Arabia has also allocated $62 billion to develop the ancient city of Diriya, which is near Riyadh, $23.6 billion to develop a luxury eco-resort on the Red Sea, and $5 billion to transform an oil platform in the Persian Gulf in an adventure tourism resort. These are just some of the planned projects.

In January, the Saudi Arabian government raised $12 billion in a bond sale, according to Bloomberg. According to Journal estimates, the sale of another 1% stake in Aramco could bring in about $20 billion.

A leading oil country took out a second huge loan in just 2 months

What is the repayment term of the issued bonds

According to an October statement by the International Monetary Fund, the Saudis need oil at about $86 a barrel to finance their spending commitments. Brent crude averaged $83 a barrel last year, according to the U.S. Energy Information Administration, well below $101 in 2022.