Saudi Wealth Fund Endures Eight Billion Dollar Writedown Amid Giga Project Delays And Cost Overruns

Saudi Arabia’s sovereign wealth fund has reduced the value of its flagship “giga-projects” by eight billion dollars, casting a fresh spotlight on the challenges facing the kingdom’s high-profile economic transformation plans. The Public Investment Fund’s (PIF) recent annual report reveals that projects such as Neom, a high-tech development in the desert, are now valued at 211 billion riyals – about 56 billion dollars – down by over twelve per cent compared to the 241 billion riyal valuation announced in 2023.

Cost overruns, construction delays, and shifting economic circumstances have prompted the writedown as the kingdom contends with weaker oil prices and changing priorities for infrastructure investment. Neom, intended to be a gleaming metropolis on the Red Sea coast, has experienced repeated delays, with at least one contractor reportedly reducing its workforce when the focus moved from constructing sections of The Line – a planned 170-kilometre linear city – to other priorities.

The initial launch date for The Line was set for 2026, though the prospect of meeting that deadline appears remote as the country prepares for a host of major events, including the 2034 FIFA World Cup, which will require further significant investment in sporting and public facilities. Monica Malik, chief economist at Abu Dhabi Commercial Bank, suggests that scaling back and extending timelines for these ventures reflects a pragmatic approach in light of subdued oil revenues and new national commitments.

Despite these setbacks, the Vision 2030 mega-projects remain central to Crown Prince Mohammed bin Salman’s ambition to diversify the Saudi economy away from oil. The annual report also shows that PIF’s overall assets under management increased by nineteen per cent year-on-year to reach 913 billion dollars. However, the proportion of international investments within PIF’s portfolio declined from twenty per cent to seventeen per cent, underscoring a more domestic focus.

PIF’s average annual returns slipped from 8.7 per cent in 2023 to 7.2 per cent, with net profits dropping by sixty per cent earlier this year, attributed to higher interest rates, inflation, and the impairments tied to troubled projects. Even as the economic landscape complicates grand plans, PIF maintains its position as a central pillar for the kingdom’s future growth and diversification agenda.