Saudi Arabia's futuristic megaprojects are so expensive that even its oil riches may not be enough

Saudi Arabia's futuristic megaprojects are so expensive that even its oil riches may not be enough
A rendering of The Line, one of the Neom megaprojects.Neom
  • Saudi Arabia has started borrowing to fund megaprojects including Neom, The Wall Street Journal reported.
  • The kingdom is spending vast amounts of money to diversify its economy.

Saudi Arabia is borrowing to help fund an array of ambitious projects including the $500 billion Neom desert megacity, The Wall Street Journal reported.

Under its ambitious ruler Mohammed bin Salman's Vision 2030 project, Saudi Arabia is seeking to diversify its economy away from fossil fuels and become a global hub for technology and innovation.

The Saudi sovereign wealth fund, the Public Investment Fund, is providing funding for cornerstone "gigaprojects" estimated to cost tens of billions of dollars apiece.

However, the fund's cash has been depleted to its lowest level since December 2020, with about $15 billion on hand, The Journal reported.

The kingdom is turning to borrowing for the first time in many years to boost its funds, as well as selling more shares in state oil company Aramco, per the report.


"It's mind-boggling the amount of stuff that's trying to be done here," Tim Callen, a visiting fellow at the Arab Gulf States Institute think tank in Washington, told The Journal.

He said Saudi Arabia may need to raise another $270 billion for the Public Investment Fund by 2030. That is likely to require further borrowing, as well as eating into foreign currency reserves used to peg the Saudi riyal to the dollar.

As part of Vision 2030, Saudi Arabia has also earmarked $62 billion to develop the ancient city of Diryah, $23.6 billion for developing a luxury Red Sea eco-resort, and $5 billion for transforming a Persian Gulf oil rig into an adventure tourism resort, among a huge range of projects.

In January, the Saudia Arabian government raised $12 billion by selling bonds, per Bloomberg, while the PIF sold bonds worth $5 billion weeks later. The Journal estimated that selling another 1% slice of Aramco shares could raise about $20 billion.

The International Monetary Fund said in October that the Saudis needed oil to be about $86 a barrel to fund its spending commitments. Brent crude, the global benchmark, averaged $83 a barrel last year, according to the US Energy Information Administration — sharply lower than the $101 for 2022.


Karen Young, a nonresident senior fellow at the Middle East Institute, told The Journal that some of the Vision 2030 projects might could be scaled back or stalled amid rising costs in the coming years due to funding issues.