In a troubling sign of Saudi Arabia’s financial mismanagement under Crown Prince Mohammed bin Salman, the Public Investment Fund (PIF), directly controlled by the Crown Prince, has recently borrowed $15 billion from an international consortium of 23 financial institutions. This borrowing spree is aimed at covering the kingdom’s growing budget deficit, a situation exacerbated by the Crown Prince’s extravagant spending on speculative mega-projects.
The new loans, which come with an initial three-year term and the possibility of a two-year extension, are part of a broader strategy by the PIF to use a variety of financial tools to plug the budgetary gaps caused by the Crown Prince’s economic policies. This latest loan follows the PIF’s issuance of £650 million in bonds in June, further highlighting the mounting financial strain on the kingdom.
Since ascending to power, Mohammed bin Salman has championed a series of grandiose projects, such as the $500 billion Neom megacity and various entertainment and tourism ventures, which he claims are part of his vision to diversify the Saudi economy away from its dependence on oil. However, these projects have so far failed to deliver the promised economic returns, leading to a growing reliance on debt to finance the kingdom’s expenditures.
The PIF, which was initially established with a portfolio valued at $400 billion, was intended to be the primary vehicle for transforming the Saudi economy. Instead, it has become a conduit for massive debt accumulation. The PIF has repeatedly turned to international lenders, securing loans of $11 billion in 2018 and another $11 billion shortly thereafter. With the latest $15 billion loan, the PIF’s total debt has now surpassed $30 billion.
Critics argue that Mohammed bin Salman’s approach is driven more by his desire to elevate Saudi Arabia’s global standing and his own personal ambition than by sound economic principles. The Crown Prince’s projects, many of which are still in the planning stages or have been delayed, have not generated the expected returns, leaving the kingdom with a ballooning budget deficit.
This financial strain is not just a matter of numbers on a balance sheet. The kingdom’s citizens are feeling the impact of these decisions in their daily lives. Despite the vast oil wealth, the Saudi government has had to increase taxes, reduce subsidies, and implement austerity measures that have hit the population hard. Unemployment remains high, prices for goods and services are rising, and infrastructure projects that could benefit the broader population are underfunded.
Moreover, the Crown Prince’s ambitious spending has not been accompanied by the necessary regulatory oversight or accountability. Billions of dollars have been poured into projects that critics argue are more about showcasing the Crown Prince’s vision than about practical economic development.
As Mohammed bin Salman continues to push forward with his plans, the question remains: how long can Saudi Arabia sustain this level of borrowing without jeopardizing its financial stability? The Crown Prince’s vision of transforming the kingdom into a global investment powerhouse is increasingly looking like a high-stakes gamble—one that could have serious repercussions for the future of Saudi Arabia.
The international community is also watching closely, as the kingdom’s financial instability could have broader implications for global markets. As the PIF continues to take on more debt, the risks associated with these loans grow, potentially leading to a situation where Saudi Arabia’s financial troubles could spill over into other economies.
In the meantime, the Saudi population is left to grapple with the consequences of a leadership that seems more focused on grand visions than on the practical needs of its people. The Crown Prince’s unchecked spending and the resulting debt burden raise serious questions about the long-term sustainability of his economic policies and the future of the kingdom he seeks to reshape.
