"Analysis: How rich is Saudi Arabia? Kingdom does the math in balance sheet overhaul"

" \n The kingdom is working on creating a consolidated balance sheet of its assets and liabilities which will include items currently kept off the oil-rich economy\u2019s books, including the investments and debts of its powerful sovereign wealth fund. \n \n\n \n \u201cThe main purpose of this programme is to have a financial equivalent of an MRI of the government balance sheet,\u201d a Finance Ministry spokesman told Reuters, adding that it would include assets and liabilities that are currently \u201coff-balance sheet\u201d. \n \n\n \n Saudi Arabia\u2019s Crown Prince and de facto ruler Mohammed bin Salman has put Public Investment Fund (PIF), Saudi Arabia\u2019s main sovereign wealth fund, at the centre of reforms aimed at diversifying the economy of the world\u2019s top oil exporter away from fossil fuel. \n \n\n \n Under the prince\u2019s chairmanship, PIF has transformed from a sleepy sovereign wealth fund into a global investment vehicle making multi-billion dollar bets on hi-tech companies such as Uber as well as other equity investments and pledging tens of billions of dollars to funds run by Japan\u2019s Softbank. \n \n\n \n Its financial statements are not published and it does not feature in the kingdom\u2019s budget, which is publicly available. \n \n\n \n Gulf countries don\u2019t typically publish information about their overall debts and assets but the PIF\u2019s riskier investment profile and infusion of state funding have made its opacity an issue for some investors. \n \n\n \n \u201cTransfers of wealth from liquid pools of assets like central bank reserves into PIF\u2019s less liquid (and less transparent) investments increases the overall risk profile of the public sector balance sheet,\u201d said Kirjanis Krustins, a director in Fitch\u2019s sovereign team. \n \n\n \n \u201cDebt investors would tend to see the government and its key government related entities such as PIF as representing substantially the same risk. Thus the levering up of the broader Saudi complex could at some point impact the government\u2019s own borrowing costs,\u201d he said. \n \n\n \n The government media office did not respond to a request for comment. \n \n\n \n Aramco billions \n \n\n \n The government started working in the second half of last year on the so-called Sovereign Asset and Liability Management (SALM) framework and the spokesman said it was a \u2018long-term project\u2019 with no decision yet made on when and how its results would be disclosed. \n \n\n \n \u201cIf we use benchmarks we will see countries spent a couple of years to implement the consolidation phase,\u201d he said of the project. \n \n\n \n The PIF\u2019s finances are formidable. \n \n\n \n Its assets have swelled to $400 billion as of 2020 from $150 billion in 2015, with the fund bolstered by an expected $70 billion payday from Saudi Aramco, the state oil company, for PIF\u2019s stake in a petrochemical giant and a $40 billion transfer from the central bank\u2019s foreign reserves. \n \n\n \n It was also the recipient of nearly $30 billion in proceeds from Aramco\u2019s initial public offering in 2019. \n \n\n \n The fund has raised $21 billion in loans between 2018 and 2019, and is finalising a new facility expected to be over $10 billion in size, sources have said. \n \n\n \n The normal way \n \n\n \n Despite Saudi\u2019s oil wealth, creating enough jobs for the kingdom\u2019s young population is one of the biggest challenges facing Prince Mohammed, known in the West as MbS. \n \n\n \n The government has been pushing through economic policies since 2016 aiming to create millions of jobs and reduce unemployment to 7% by 2030. But fiscal austerity to contain a yawning deficit has slowed investment, and the coronavirus crisis last year pushed unemployment up to a record 15.4%. \n \n\n \n To get the deficit down from an eye-watering 12% of GDP last year to a shortfall of 4.9% by the end of this year, Riyadh has slashed capital spending. \n \n\n \n It is relying instead on the PIF to fund some of the major infrastructure projects to help boost growth, including NEOM, a $500 billion high-tech business zone, and the recently announced \u201cThe Line\u201d, a 1 million inhabitants carbon-free city in NEOM, expected to cost between $100 billion and $200 billion. \n \n\n \n PIF plans to inject at least 150 billion riyals ($40 billion) annually into the local economy until 2025, and to increase its assets to 4 trillion riyals ($1.07 trillion) by that date, Prince Mohammed has said. \n \n\n \n \u201cMBS understands that unless the economy grows at a rate above 6.5-7%, the youth unemployment rate will stagnate or grow \u2013 and that is a ticking time bomb,\u201d said Khaled Abdel Majeed, MENA fund manager at London-based SAM Capital Partners, an investment advisory firm, commenting about transfers of state funds to PIF. \n \n\n \n \u201cDoing things the \u2018normal\u2019 way through \u2018normal\u2019 channels will take more time than is available.\u201d \n "

"Analysis: How rich is Saudi Arabia? Kingdom does the math in balance sheet overhaul"

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