Saudi Arabia | Turns to Debt to Boost and Develop Megaprojects Reducing the Deficit

Saudi Arabia, through its Vision 2030 plan, is actively diversifying its economy by promoting foreign investment to reduce its reliance on oil and create new opportunities, and this involves attracting FDI, foreign direct investments and increasing the contribution them to its GDP using the strategy to turn debt to boost and develop megaprojects reducing the deficit.

To attract direct investments coming from abroad the Saudi Governemt is implementing some reforms like a new Investment Law that eliminates barriers between domestic and foreign investors, offering equal rights and obligations and also simplifying bureaucratic processes that often drag on over time and encounter obstacles or legal issues.

The Arab Kingdom Government through an accurate analysis of its economy decided to take a further step in diversifying its sources of investment by attracting international investors and issuing debt through its subsidiaries to reduce its dependence on state funding.

The famous PIF, Public Investment Fund of Saudi Arabia, one of the world's most important funds, under the chairmanship and guidance of HRH Prince Mohammed bin Salman bin Abdulaziz Al Saud, supported by a Board responsible for overseeing PIF's long - terms strategy, investment policy and performances is a key driver of Saudi Vision 2030 to adopt plans in line with this relevant initiative.

A new strategy was developed to solve $40.0 billion of debt that has been issued in 2025 and the spending forecast of about $70.0 billion, while financing its projects.

Among the fund's subsidiary that may be chosen to over the debt are NEOM, a famed city planned with a fusion of architecture and ecology, being projected by Saudi Arabia in Tabuk Province and Avis. 

Similarly the Public Investment Fund will issue euro bonds for the first time to attract investors from Europe and North American investors to the Saudi Arabian market.

In January 2025 the PIF obtained $4.0 billion after sukuk bonds, Islamic bonds linked to an underlying asset were issued for a value of $1.25 billion and it is the closest precedent for a success story in terms of bond issues.

These profits are in addition to the $14.3 billion that the Public Investment Fund of Saudi Arabia has raised since the beginning of 2025.

Saudi Arabia is a country with an economy mainly dependent on hydrocarbons, where about 70% of exports and 40% of the GDP, the Gross Domestic Product depend directly on the oil industry and facing significant financial challenges due to the ups and down of the petroleum products.

The Saudi Kingdom to prevent the problem from having serious consequences, through its Government would need the price of a barrel of oil to be valued $108.0, as opposed to to the current $70.0, and added to this is the fall in direct foreign investment and the budget deficit.

These particular conditions reflect the decision of the Saudi Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud to establish investment agreements with the United States of America over the next four years worth $600 billion.

However, the reduction in dividends from the company Aramco, officially the Saudi Arabian Oil Company, a majority state - owned petroleum and natural gas group could seriously affect the financing of the fund, so the situation entails several difficulties.

In recent years and especially after the pandemic, the Public Investment Fund has promoted over 100 companies in all the sectors in which the country is seeking foreign investments, such as artificial intelligence, energy and tourism.

Saudi Arabia has invested in projects such as Diriyah Holding Company, a catalyst of Vision 2030, a group created for safeguarding Diriya's rich history and heritage while delivering innovative culture led place – making of unprecedented ambition and scope, which is responsible for the transformation of this historic area with a budget of more than $63.0 billion.

The Saudi Government hopes that the purchase of bonds will maintain the solid demand that it has achieved over the last five year, however not all projected planned and developed have attracted the attention of the main investors for different reasons.

These facts have oriented the Public Investment Fund to announce that they will also focus on national projects to safeguard the country's ecomic transformation, waiting for a a major event as the FIFA World Cup 2034 on the horizon that will be hosted by the Saudi Kingdom.

Link - https://www.atalayar.com/en/articulo/economy-and-business/saudi-arabia-turns-to-debt-to-boost-megaprojects-and-reduce-deficit/20250323190000212483.html