Even rich countries like Saudi Arabia are starting to have to… borrow money.

Super projects "burn money"

Saudi Arabia has been home to some of the world’s most lavish spending plans over the past year. The kingdom is halfway through its “Vision 2030” economic development plan, spearheaded by Crown Prince Mohammed bin Salman, to become a diversified economic powerhouse.

The spearhead of the plan is what Crown Prince Mohammed bin Salman calls “giga projects.” These include New Murabba, a $48 billion complex dominated by a 400-meter-tall cube, and a planned sci-fi megacity of 9 million people called Neom. Comprising two 170-kilometer-long glass-clad buildings, Neom is expected to cost… $500 billion to build.

Saudi Arabia's Neom mega-city project, consisting of two 170 km long buildings covered in mirrored glass, with a construction cost of up to... 500 billion USD - Photo: WSJ

Last spring, Saudi Arabia ordered 121 787 Dreamliners from Boeing worth $35 billion, with half of those planes destined for its new airline. The kingdom has also shaken up professional golf and soccer with its proposed merger of LIV Golf and the PGA, as well as its recruitment of soccer superstars for the Saudi Arabian National League with astronomical salaries.

There are also new commitments, including a plan to spend $38 billion to develop e -sports and video games, as well as about $100 billion in investment in chips, electronics and domestic electric car manufacturing.

All of the above projects are “burning money” terribly.

Saudi Arabia's sovereign wealth fund (PIF), which is tasked with implementing these initiatives, said last month that its cash levels as of September had fallen by about three-quarters to about $15 billion, the lowest since December 2020, when the fund began reporting data.

Budget deficit and asset sales

The spending only continues to mount. Riyadh’s massive $62 billion Diriyah project is a sea of ​​construction cranes, while armies of excavators dig the foundations for the first of Neom’s sprawling towers.

Economists say the PIF could need hundreds of billions of dollars more from the state. Saudi Arabia's "Vision 2030" plan calls for the PIF to manage a $2 trillion investment portfolio, up from $718 billion by September 2023.

Saudi Arabia spent $35 billion to buy 121 planes from Boeing - Photo: WSJ

“It’s amazing how much work is being done in Saudi Arabia,” said Tim Callen, a visiting fellow at the Washington-based Arab Gulf States Institute. Callen estimates that by 2030, the Saudi government may need to contribute an additional $270 billion to the PIF.

At the same time that spending has surged, oil revenues have stagnated. The IMF estimates that oil prices will need to be above $86 a barrel in 2023 and $80 this year to balance the Saudi government’s budget.

Prices have hovered around $81 over the past year. Despite massive budget spending, Saudi Arabia is set to experience a rare economic downturn in 2023. This year, Saudi Arabia is expected to run a budget deficit of $21 billion, or about 2% of gross domestic product.

To keep up with its spending, Saudi Arabia has turned to a tool it has shied away from in recent decades: borrowing. Sources told the Wall Street Journal that the kingdom also plans to sell a huge stake in its crown jewel: Saudi Aramco, the world’s largest oil company.

Selling Aramco shares poses a trade-off. It reduces one of the kingdom’s biggest sources of ongoing revenue: Aramco dividends. But Saudi officials say they want outside investors to help share the burden.

Nguyen Khanh

Source: https://www.congluan.vn/vung-tien-cho-cac-sieu-du-an-tren-sa-mac-a-rap-xe-ut-bat-dau-phai-di-vay-post285125.html