Saudi Arabia’s sovereign wealth fund is pushing ahead with plans to reduce its stakes in some of the kingdom’s biggest companies and raise billions of dollars for new investments, Bloomberg revealed on Friday.
People familiar with the matter affirmed to the paper that the Public Investment Fund (PIF) has recently been holding informal talks with investment banks about paring its holdings in several state-backed firms that trade on the local stock exchange.
The PIF is also considering plans to potentially list more state-owned assets, the sources added.
PIF has investments across a range of industries from Saudi Electricity and utility Acwa Power to bourse operator Saudi Tadawul Group.
It owns majority stakes in the $53 billion commodities firm Saudi Arabian Mining and $54 billion carrier Saudi Telecom, as well as holdings in lenders including Saudi National Bank, Riyad Bank and Alinma.
According to the sources, the PIF hasn’t finalized the details of particular sales and may wait until next year before executing the transactions.
MBS aims to grow its assets to about $1.1 trillion
Any stake sales would come as Riyadh pushes ahead with raising capital to diversify its economy, in line with Crown Prince Mohammed Bin Salman (MBS)’s ambitions to pivot away from oil.
The PIF also plans to invest $40 billion locally a year until 2025 and help bankroll ambitious projects, including Neom — a $500 billion city intended to attract new industries. Locally, the fund has sold stakes in firms including the stock exchange as well as utility ACWA Power, and raised $3.2 billion by selling part of its holdings in Saudi Telecom.
The fund, chaired by the crown prince, has said it wants to grow its assets to about $1.1 trillion by 2025.
Saudi surplus budget used to implement Vision 2030 plan
MBS is racing with time to use the Saudi surplus budget to finance his imaginary Vision 2030 plan.
Saudi Arabia is planning to achieve an estimated billion increase in the budget for the current year 2022, exceeding 90 billion riyals ($24 billion) after years of fiscal deficit (2015-2021).
The provisional revenue collection figures for the Fiscal Year 2021-22 showed tax revenue increased from 63.9 billion riyals in the first quarter of 2021, to 72.7 billion riyals in the first quarter of 2022.
This rise was intended to be temporary after the drop in oil prices from mid-2014 to early 2016. However, the Value Added Tax (VAT) rate increased from 5% to 15% following the Covid outbreak in 2020. The new 15 % VAT has been continuing despite the increase in oil prices.
The government of Saudi Arabia projected that about 223 billion Saudi Arabian Riyal of its revenue for 2022 was generated from taxation on goods and services. This pushed MBS to use the surplus budget in implementing Vision 2030 plan instead of reducing taxation.
Saudi PIF Invests in Israeli Hotel Chain
Bloomberg has recently revealed that Saudi Arabia’s Public Investment Fund and A&K Travel Group have invested $50 million in Habitas, the luxury hotel company.
No valuation was disclosed, although the firm said the current fundraising was in return for a minority stake. Habitas has now raised more than $85 million.
Habitas Hotel was opened by an Israeli businessman in the Saudi city of Al-Ula in November 2021.
Growing poverty rates in Saudi Arabia
A state of anger has spread in Saudi social media platforms in light of the growing poverty and unemployment rates in the Kingdom since MBS took office.
Many social media users affirmed that MBS’s Vision 2030 will not alleviate poverty among Saudis and its austerity plan could lead to upheaval.
Others slammed MBS’s decision to provide $400 million in humanitarian aid to Ukraine while his people are suffocating with growing poverty rates.
