Saudi Arabia’s Public Investment Fund (PIF) reported a 60% decline in net profit for 2024, citing high interest rates, inflation, and project impairments.

The fund’s net profit decreased to 25.8 billion riyals (US$6.9 billion), down from 64.4 billion riyals (US$17.1 billion) in 2023.

Analysts said that delays and adjustments in major projects, including the NEOM urban development initiative, contributed to the fund’s challenges.

Despite the earnings decline, PIF’s assets under management grew 18% year-on-year to 4.3 trillion riyals (US$1.1 trillion), supported by dividend income from key holdings, such as Saudi Aramco and Saudi National Bank.

The fund swung from a 138 billion riyals (US$36.8 billion) profit in July 2023 to a 140 billion riyals (US$37.3 billion) loss this year, driven by unrealized asset losses.

PIF remains central to Vision 2030, aiming to reduce Saudi Arabia’s reliance on oil through investments in infrastructure and tech.

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🔗 Source: Zawya

🧠 Food for thought

1️⃣ Saudi megaprojects face recalibration amid economic realities

The 60% profit drop at PIF reflects a broader recalibration happening across Saudi Arabia’s ambitious development agenda.

The fund is implementing significant budget cuts of up to 20% across its entire portfolio for 2025, with some projects facing reductions as high as 60% and even cancellation of major contracts like a $5 billion deal for Neom 1.

This scaling back extends to flagship projects like Neom, which was originally projected to cost $1.5 trillion and cover an area 33 times the size of New York City, but is now expected to accommodate fewer than 300,000 residents by 2030 with only 2.4 km completed by that date 2.

The adjustments come as Saudi Arabia anticipates a fiscal deficit of 2.3% of GDP for 2025, an increase from previous projections, signaling growing financial constraints 1.

These challenges highlight the tension between Saudi Arabia’s grand vision and economic realities, forcing a more pragmatic approach that prioritizes projects with clearer returns on investment.

2️⃣ Oil dependency persists despite diversification progress

Despite eight years of Vision 2030 implementation, Saudi Arabia remains heavily dependent on oil, which still constitutes approximately 61% of the kingdom’s revenue 2.

Oil accounts for 43% of Saudi GDP and 75% of government revenues, highlighting the magnitude of the diversification challenge 3.

The reduction in expected dividend payments from Saudi Aramco to $85.4 billion for 2025 directly impacts funds available for PIF and government budgets, creating a ripple effect across the entire Vision 2030 agenda 1.

While the non-oil sector has shown promising growth of 5.4% in the first half of 2023 4, the economy remains vulnerable to oil price fluctuations, with current lower crude prices (around $65 per barrel) directly contributing to PIF’s profit decline 2.

This persistent oil dependency explains why the recent profit drop at PIF is particularly concerning for Saudi leadership, as it highlights the challenges in creating alternative revenue streams substantial enough to replace oil income.

3️⃣ Funding strategy pivots toward debt and private capital

Facing financial constraints, PIF is increasingly turning to debt financing and private capital to fund its ambitious projects rather than relying solely on government allocations.

The fund raised $4 billion through an international bond sale, indicating a shift toward debt markets as oil revenues decline 2.

This approach aligns with a broader strategic pivot to attract more private capital and ensure mega-projects are economically viable, including exploring partnerships with international investors 1.

Saudi Arabia has established special economic zones (SEZs) specifically designed to attract private investment, while the PIF has positioned itself as a crucial partner for regional and international investors through co-investment opportunities 5.

The transition reflects an evolving maturity in Saudi Arabia’s development approach, acknowledging that the government cannot fund the entire Vision 2030 agenda alone and that sustainable development requires broader capital participation.

Recent Saudi Arabia Public Investment Fund developments

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