Saudi Arabia’s Public Investment Fund (PIF) is diversifying its funding sources to support the kingdom’s expansive spending plans, with moves to engage a broader range of investors and increase debt sales through its subsidiaries. According to insiders, the fund is contemplating a debut euro-denominated bond issuance this year and making its first-ever push to attract onshore U.S. investors. PIF is also encouraging its subsidiaries, including Neom Co. and AviLease, to issue debt independently, signaling a shift towards a more decentralized funding approach.
This expansion aligns with PIF’s new long-term financing strategy, designed to reduce its reliance on additional government funding, one source explained. The PIF, a central player in Crown Prince Mohammed bin Salman’s Vision 2030 initiative, has already raised $4 billion in debt markets in January and saw its mining unit follow suit with a $1.25 billion Islamic bond in February.
The additional debt issuance is expected to bolster the PIF’s efforts, contributing to the kingdom’s $14.3 billion in sovereign bond sales this year alone. These sales extend Saudi Arabia’s position as one of the leading issuers in emerging markets, a status it has held over the past two years.
The kingdom’s ambitious spending plans, including significant investments in major events like the FIFA World Cup in 2034, are driving the PIF’s push for greater financing. However, with sluggish foreign direct investment, low oil prices, and ongoing budget deficits, the government has begun re-evaluating and re-prioritizing some projects.
Bloomberg Economics estimates that Saudi Arabia needs oil prices to hit approximately $108 per barrel to support its spending plans, factoring in the PIF’s domestic investments. This is well above the current market price of about $70 a barrel, further complicating the kingdom’s fiscal strategy.
In addition to these challenges, Crown Prince Mohammed bin Salman has committed to $600 billion worth of trade and investment agreements with the U.S. over the next four years, a pledge that puts further pressure on the PIF to secure more capital to fulfill these commitments. President Donald Trump has even encouraged the kingdom to increase its investment, intensifying the need for additional funding.
As part of its broader financing strategy, the PIF plans to ramp up its annual investments to as much as $70 billion. This funding will come from a mix of retained earnings, borrowing, and cash or asset transfers from the Saudi government. However, dividends from Saudi Aramco, in which the PIF holds a 16% stake, are expected to decrease following the oil giant’s recent decision to reduce its annual payout.
To navigate this funding gap, the PIF is considering additional options, including selling portions of its $461 billion portfolio of listed stocks. The fund is also exploring the possibility of listing several companies on the Saudi stock exchange, with plans in place for medical procurement firm Nupco, Saudi Tabreed District Cooling Co., and Saudi Global Ports Co., among others.
The PIF has established approximately 100 companies across various sectors, including tourism, artificial intelligence, and energy. One of the most notable initiatives is Diriyah Co., a $63 billion project aimed at transforming a historic district into a tourism destination. According to Diriyah CEO Jerry Inzerillo, the company has garnered significant interest from potential foreign equity partners who may eventually replace the PIF as the primary investor. The company is also expected to issue debt later this year.
Moving forward, the PIF plans to encourage its portfolio companies to borrow based on their own financial strength and business plans, without offering explicit credit support. The fund’s financing department will oversee these debt sales, maintaining a focus on safeguarding credit ratings.
Experts predict that the overall debt issuance by Saudi corporates, including banks, the PIF, and its subsidiaries, will rise to $40 billion in 2025, up from $31 billion in 2024. Ali Dhaloomal, a credit research analyst at BofA Global Research, believes that the PIF’s push for international debt issuance will create room in the local market for companies not yet ready to access global funding.
However, a key question remains: will investors be willing to buy into these bond sales? While demand for PIF debt has been strong, some analysts caution that certain projects designed to fulfill the broader objectives of the Saudi government may not yield immediate financial returns for investors. Farouk Soussa, an economist at Goldman Sachs, notes that private investors are unlikely to commit to projects simply because they serve the country’s strategic interests.
The PIF’s evolving financing strategy marks a critical phase in Saudi Arabia’s efforts to support Vision 2030 while balancing its fiscal challenges. The coming months will reveal whether these debt initiatives can help the kingdom achieve its ambitious goals.
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