Despite what Saudi officials announce about the Saudi Wealth Fund achieving financial surpluses, is it turning to loans? Why? And where did the said financial returns go?
“To reach two trillion dollars in 2030” is the goal announced by Saudi Crown Prince Mohammed bin Salman years ago, while presenting the Kingdom’s Vision 2030, with the dream of making the Saudi sovereign wealth fund the largest in the world , which is the cornerstone of the strategic vision In view of the main projects that he will finance: the city of NEOM, the entertainment city, and the Red Sea tourism project.
However, what the ongoing international reports reveal about internal disputes regarding the fund’s management mechanism between bin Salman and the officials there, and the fund’s debt of more than $17 billion, raises a number of questions about the realism of the presentation, and the destination of the financial surpluses that Saudi officials announce from time to time.
The sixth largest sovereign wealth fund in the world.. is in debt!
a “strange strategy”. With this description, the “Wall Street Journal” summed up his talk about the Saudi investment fund. How can a fund that is considered the sixth largest investment fund in the world to borrow 17 billion dollars for a period of 7 years, to help it repay a loan of 11 billion dollars, since 2018!
“It is not unusual for sovereign wealth funds to carry large debts”, says the “Wall Street Journal”, pointing to “Ibn Salman’s mismanagement, but rather his gambling with hundreds of billions of dollars on his personal desires”, according to the American newspaper itself. .
Bin Salman’s mismanagement of the sovereign fund, which he has headed since 2015, has created a rift in the Gulf House between the Saudi crown prince, who has been involved in stock picking and investing in the video game sector, luxury electric cars and an English soccer team, and a growing group of professional financiers who are trying to put up barriers to how the kingdom’s oil wealth is spent.
During the period of the “Corona” pandemic, the differences worsened, with Bin Salman’s insistence on withdrawing more money to buy international stocks, which he saw as a profitable opportunity. However, the fund’s financial officials had the opposite vision, given the risks that this would undermine the local currency’s link to the dollar. In the end, the dispute ended in the surrender of the fund’s board, due to the increasing pressure exerted by bin Salman.
In the absence of sufficient liquid assets to satisfy Bin Salman’s desire to move quickly, the fund asked the Saudi Central Bank to grant him tens of billions of dollars. This raises questions about the future of the Saudi fund, which manages about $600 billion, in light of unpromising economic indicators. As the Saudi credit rating agency, Fitch, warned of the risks of slowing lending growth during 2023. If the central bank does not intervene to support additional liquidity, interbank interest rates across the Kingdom could also rise.
According to Bloomberg International, the Saudi government is trying to assert control over banks’ capital costs, as the liquidity crisis threatens to undermine its ability to finance bin Salman’s projects.
It revealed that Saudi banks are facing a shortage of liquidity as the rapid increase in loans, which has not been matched by growth in deposits, has led to an increase in the Kingdom’s banks’ demands for government funding.
Where does the fund’s money go?
It is true that the Saudi investment fund puts profit considerations in the priority of its investment policy, and this was reflected in its purchase of shares in the global “Uber” company, and most of the shares of the English football club “Newcastle”, and there are many examples, but it seems that political considerations also play a role in making deals, and the determination of Companies and countries in which investments are sometimes made.
In this context, says Bloomberg, “Bin Salman exploits the sovereign wealth fund and the flow of money for political purposes, aiming to play a greater role in the global arena and gain geopolitical influence.”
Here comes the most important issue raised last year regarding Bin Salman’s investments in the sovereign wealth fund. The New York Times revealed that the Saudi wealth fund invested two billion dollars in a company for stocks and investments , founded by Jared Kushner, former President Donald Trump’s son-in-law. Ultimately, it is in the interest of Israeli companies, which the Israeli media has also talked about several times.
Also read: Kushner: Saudi Arabia allowed us to invest its money in Israeli companies
Regarding the reasons for the Saudi crown prince giving Kushner two billion dollars, British investigative journalist Vicki Ward spoke about it in a long investigation and said: “Bin Salman is grateful for Kushner’s role in the Saudi American rapprochement during the Trump era, and the main bet is that the latter will return to the White House.” in the next presidential elections.
She explained Journalist Vicki Ward That there is an additional reason that prompted Ibn Salman not to hesitate to pay this amount to Kushner (from the funds of the sovereign wealth fund), which is his reward for his role in the removal of the former Saudi crown prince , Muhammad bin Nayef, of his way to the mandate of the covenant, and then to rule the kingdom in the future. Not to mention Kushner’s support for Bin Salman in the matter of the murder of journalist Jamal Khashoggi.
A few days ago, the American magazine “Newsweek” said that former US President Donald Trump may face a new legal problem if the Ministry of Justice decides to investigate his business dealings with Mohammed bin Salman, after new details were revealed which is the financing of the Investment Fund in Saudi Arabia for the golf tournament (LIV), which is sponsored by Trump.
Several questions were also raised about the Fund’s existence as an indirect investor in Twitter. And did the case have an impact on the company’s cold handling of the Saudi spying scandal, in which the former employee of “Twitter”, Ahmed Abu Ammo, was found guilty of spying on opponents of the Kingdom?
In this context, human rights organizations constantly express their concern that the objective behind the foreign investments of the sovereign fund is to “launder human rights violations”, under various investment titles.
In light of the ongoing disputes between Ibn Salman and Saudi officials over the management of the sovereign wealth fund and the destination of investment funds, Ibn Salman’s vision, according to the British newspaper The Guardian, “will turn into a mirage if he continues with his reckless behavior in running the country.”