The Saudi Private Investment Fund has written down $8 billion from the value of the Saudi state’s megaprojects over the past year as they struggle to move forward amid budget overruns combined with weaker oil prices.
According to a Financial Times report that cited an unnamed source, Saudi Arabia’s sovereign wealth fund’s investments in projects, including the smart city Neom, at the end of 2024 were worth the equivalent of $56 billion. This was down by 12.4% from the previous year, the report said.
“There were impairments to certain projects primarily relating to global economic market conditions, changes to operational plans and increases in budgeted costs,” the unnamed source told the Financial Times.
Last month, the media reported that the Saudi government was reassessing the scope and timeline of the $500-billion Neom project aimed at diversifying the Saudi economy away from crude oil. Per those reports, the reassessment was launched in response to deepening financial strain across the kingdom’s Vision 2030 infrastructure program. The move comes amid mounting vendor arrears and a liquidity crunch that has prompted an urgent reallocation of energy-sector capital and personnel.
It is these megaprojects that make Saudi Arabia’s breakeven oil price so high—quite a bit higher than current oil prices. Because of this price environment, economists earlier this year warned that the kingdom would have to reduce its spending plans by more than what Riyadh planned for this year, which was a 3.7% reduction in spending.
“A sharper and sustained fall in the oil price would require a deeper retrenchment in government spending to contain the size of the shortfall and the building in government debt,” Monica Malik, the chief economist of Abu Dhabi Commercial Bank, told the Financial Times at the time. “There would also likely be some further adjustment and recalibration to the off-budget investment plans,” she added.
By Irina Slav for Oilprice.com
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