Saudi Wealth Fund Annual Profit Tumbles 60% As High Rates And Inflation Bite

Even though its assets surpassed $1 trillion, Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), reported a notable 60% decline in its annual net profit for 2024. Due to a combination of high interest rates, inflation, and project impairments, the PIF’s net profit dropped significantly from the prior year to 25.8 billion riyals ($6.9 billion).

Rising project costs and operational changes are the main causes of the impairments that have affected the fund’s financial performance. The Vision 2030 initiative, which includes the PIF’s strategic investments, aims to diversify Saudi Arabia’s economy away from its reliance on oil. Large-scale initiatives like NEOM, an ambitious urban and industrial development close to the Red Sea coast that is about the size of Belgium, are among these investments.

According to economists like Monica Malik, the impairments may have been caused in part by the prioritisation of particular projects and the longer timelines for some mega-projects. The fund’s investment strategy had to be adjusted due in large part to the growing expenses of these projects.

The PIF’s total assets increased by 18% to 4.321 trillion riyals from 3.664 trillion riyals in 2023, despite the decline in profits. Investments in a variety of industries, from multinational corporations to agriculture, are part of the fund’s diverse portfolio. The fund’s operations are still supported by dividend income, particularly from Saudi Aramco and the Saudi National Bank.

The PIF’s reported income of 138.1 billion riyals in 2023 changed to a loss of 140 billion riyals in 2024, indicating a significant decline in the organization’s overall income statement. This represents changes in asset values as well as unrealised gains and losses.

The PIF has a healthy cash position of 316 billion riyals in spite of these difficulties, and its borrowing and loans have increased marginally to 570 billion riyals, indicating ongoing financial flexibility.