Further question marks have been raised over the health of the Saudi economy following revelations that the Crown Prince Mohamed Bin Salman was required to take out a loan to fund parts of his mega project NEOM a $500 billion futuristic city-state near the Red Sea and the borders of Egypt and Jordan.
The loan was taken out by the Red Sea Development Company (TRSDC), the official developer backed by the kingdom’s sovereign wealth fund, the Public Investment Fund. According to The National TRSDC is planning to close a $3.7 billion loan from five local banks by the end of 2020 as it ramps up construction on the project. The loan was confirmed by John Pagano, TRSDC’s chief executive.
This loan is likely to raise further questions about the Saudi economy. As the world’s largest oil producer, Saudi Arabia traditionally has had no need to borrow money, so long as government spending and royal largesse did not outpace revenues. But currently the kingdom’s debt is growing due to years of falling oil prices.
The spread of Covid-19 has contributed to its debt crises, prompting Saudi Arabia to borrow $26.6 billion after it burned through foreign reserves and announced a stimulus package of $32 billion.
In July, Saudi Arabia’s economic woes were such that the kingdom was “considering all options” to bolster its economy, including the sale of state assets and, for the first time, to introduce income tax.
The kingdom’s misfortune was exacerbated by the killing of Saudi journalist Jamal Khashoggi in 2018. Global investors that once saw the kingdom’s crown prince as a safe bet were spooked by the grisly murder which western intelligence concluded was authorised by the de-facto ruler.