Team Chabuk-International Desk : Saudi Arabia wants to end its dependence on oil for its finances. Because the government knows that oil will not last forever. The state is therefore working on creating a consolidated balance sheet of its assets and liabilities, which would eliminate the current oil-rich economy, which includes investments and loans from its powerful autonomous fund. Crown Prince Mohammed bin Salman wants to make Riyadh, the capital of Saudi Arabia, an economic and trade stronghold by 2030.
Prince Mohammed bin Salman has placed the Public Investment Fund (PIF), Saudi Arabia’s main autonomous fund, at the center of reforms aimed at diversifying the economy of the world’s top oil exporter.
According to the latest move by the Saudi government, any foreign company and commercial entity that wants to win a government contract must open its regional headquarters in Saudi Arabia. The Saudi government is going to implement it from 2024.
Debt-related information about Arab countries is generally not available. But the risky investment of PIF and the financial condition of the country is definitely an issue for investors.
Kirzanis Crustins of the Fitch Sovereign team says the central bank’s investment in the PIF puts the public sector’s balance sheet at risk. Borrower investors look to the government and major government undertakings like PIFs are at similar risk.
Aramco’s investment
The government had started working on the so-called Sovereign Asset and Liability Management (SALM) framework in the first half of last year. Spokespersons said that this is a long-running project. But he never gave any information about when the result will come.
Its total assets rose to 400 billion in 2020 from 150 billion in 2015. Saudi Arabia’s state-owned oil company Aramco has invested 70 billion in it. At the same time, the central bank invested 40 billion.
The biggest challenge
Saudi oil wealth is creating a large number of jobs among the young population here. With this, this has also become a challenge. The government has been creating millions of jobs since 2016 and plans to bring unemployment to 7 per cent by 2030. But the fiscal deficit has affected investment. The impact of the corona virus last year brought unemployment to 15.4 per cent.
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