In the global web of finance and development, few institutions wield as much outsized influence as Saudi Arabia’s Public Investment Fund (PIF). Boasting nearly a trillion dollars in assets and presiding as the engine behind the country’s ambitious “Vision 2030” economic transformation, the PIF stands at the epicentre of Saudi Arabia’s developmental aspirations.
Yet, as 2025 unfolds, severe challenges rooted in the plunging price of oil have prompted sweeping spending cuts across the PIF’s portfolio. These austerity measures are reverberating far beyond the Kingdom’s borders, impacting international companies, migrant workers, and the course of several mega-projects branded as central to Saudi Arabia’s future.
Scope and ambition of PIF
Founded in 1971, the PIF has grown into the world’s sixth-largest sovereign wealth fund, swelling fivefold since 2016 to reach $941 billion by 2024, with a vision to surpass $1.1 trillion in assets under management by the end of 2025 and $2 trillion by 2030. The PIF has become synonymous with scale, ambition, and rapid national transformation.
The PIF’s reach is vast, as it has four international offices, over 2,500 employees, and approximately 170 subsidiaries. The fund’s global investment strategy is unmistakable, with sizeable stakes in some of the world’s most prominent companies such as Meta (Facebook), Disney, BP, Boeing, Uber, and Citigroup, to name a few. Sector-wise, energy claims the largest share of its portfolio (23%), followed by property (17%), IT (9%), and financial and communications services (7% each).
Equally ambitious are the domestic “giga-projects” championed by the PIF. Chief among them are NEOM (a $500 billion utopian city, planned to span 10,000 square miles) and the Red Sea Global (a luxury tourism initiative aiming to bring 19 million visitors to Saudi Arabia each year). Moreover, there are new entertainment cities, airports, transport networks, and sports ventures, including major international events that are part of the Kingdom’s reimagined future.
But the PIF’s ambitions extend beyond infrastructure, as its investments have generated more than a million jobs in three years and helped seed nearly 50 companies across 13 sectors. The PIF’s transformative importance across the Saudi economy and for entire supply chains spanning the globe is difficult to overstate.
Falling oil prices
At the heart of the PIF’s sudden retrenchment is a precipitous and persistent decline in global oil prices. According to the International Monetary Fund (IMF), Saudi Arabia needs oil to trade at $91 per barrel to balance its national budget. Yet, since August 2022, crude prices have stubbornly remained below that threshold, at times plunging far lower.
During Easter 2025, Brent crude hovered below $67 a barrel, while the US benchmark, West Texas Intermediate, slumped to under $64. By May, the decline was starker, as Brent fell to $61.63 and WTI to $58.56, both roughly 30% below their respective 12-month highs.
For Saudi Arabia, this price reality is deeply problematic. Oil revenues are the lifeblood of the national budget and, in turn, the financial ecosystem that sustains the Kingdom’s massive diversification initiatives.
The paradox is striking. Saudi Arabia must use oil money to reduce its dependency on oil. Without robust market prices, the ability to finance “post-oil” projects shrinks, creating a dangerous funding squeeze at the very moment when economic diversification is most needed.
Sweeping austerity
Faced with shrinking income, the PIF, led by Crown Prince Mohammed bin Salman, has undertaken dramatic belt-tightening. In the first half of 2024, the PIF was the world’s highest-spending state-owned investor, but by spring, it ordered spending cuts of at least 20% across controllable portfolios. In some high-profile cases, budgets have been slashed by as much as 60%.
The most visible impact is on the five flagship giga-projects, many of which serve as the poster children of Vision 2030. The scale and ambitions of the $500 billion city, NEOM, have been reduced, with the initial construction phase of its centrepiece, ‘The Line,’ now curbed from 170 kilometres to just 5 kilometres by 2030.
Additionally, a $5 billion NEOM contract was abruptly cancelled days before signing. The Red Sea Global and other major developments have faced similar delays, cost overruns, and financial uncertainty.
The effects ripple into the operational realities of hundreds of subsidiaries, ranging from the nascent Riyadh Air to marquee overseas holdings like Newcastle United Football Club. These measures have affected operations across the board, disrupting staffing, project schedules, and ongoing initiatives.
The impact has been extensive, affecting staffing, delaying projects, and disrupting ongoing operations. Restrained spending has even driven some international contractors out of the Saudi market, their confidence shaken by prolonged payment delays and mounting financial risks.
The labour fallout
Saudi Arabia’s economic retrenchment does not happen in a vacuum. More than 13 million foreign workers, mainly from the Middle East and South Asia, reside in the Kingdom, contributing labour that powers Saudi construction, infrastructure, hospitality, and services.
Over the past two years alone, nearly two million expatriates joined the Saudi workforce as the construction sector more than doubled in size. These workers, in turn, send critical income back to their home countries as remittances, sustaining their families and local economies.
Yet, as the brakes hit on spending, these workers are the first casualties. Recruiters report that expatriates are now seeking jobs elsewhere in the region, even if it means lower pay or shifts to riskier markets.
Meanwhile, large international engineering and construction conglomerates, confronted with unpaid invoices and stalled projects, have begun scaling back or withdrawing operations from the Saudi market altogether. One major European contractor reportedly cited an $800 million debt owed by Saudi clients as a catalyst for its pullout.
The national budget
The knock-on effect of low oil prices extends all the way to Saudi Aramco, the national oil company and the world’s preeminent crude exporter. As oil revenue slid, Aramco was forced to cut its 2025 dividend forecast by almost one-third, from previous highs down to $84.5 billion.
Since the PIF owns a 16% stake in Aramco, the dip translates directly to a loss of at least $6 billion in anticipated earnings for the Fund. It’s a sharp contraction that exacerbates deficits throughout the Kingdom’s public finances and development ecosystem.
The pressures on the national budget are compounded further by international obligations tied to high-profile global events. Hosting the 2029 Asian Winter Games, Expo 2030, and the 2034 FIFA World Cup anchors Saudi Arabia’s ambitions on the world stage but also places heavy demands on the Kingdom’s fiscal resources at a moment of retrenchment.
With oil revenues diminished and budget cuts biting, the PIF has begun pursuing alternative financing to sustain its investment programme and support its social and economic mandate.
The PIF tried to tap into the bond market in January 2025 by floating $4 billion in bonds. It was a sale that was four times oversubscribed. Additional sukuk (Islamic bonds) raised $1.25 billion later that spring, drawing significant investor interest and alleviating some concerns about the stability of PIF-funded projects. Credit spreads offered were intentionally attractive, ranging from 95 to 110 basis points above comparable United States Treasury bonds.
Foreign partnerships have also become a prominent part of the PIF’s new strategy. In March, it signed a landmark memorandum of understanding (MoU) with Goldman Sachs to create investment funds targeting Saudi Arabia and the wider Gulf.
Agreements with Japanese financial institutions such as Mizuho Bank, MUFG Bank, and Sumitomo Mitsui Financial Group promise up to $51 billion in fresh capital to back local market initiatives. Italian agency Sace added $3 billion more to foster cooperation with Italian companies active with PIF portfolio firms.
These moves aim to counter a worrying trend. Inbound foreign direct investment (FDI) into Saudi Arabia fell by 21% year-on-year in the third quarter of 2024, as reported by the Kingdom’s General Statistics Authority.
The government and PIF hope that more favourable financing terms, international partnerships, and continued global enthusiasm for the Kingdom’s long-term prospects will reinvigorate investment.
Are mega-projects losing steam?
The message behind the PIF’s current strategy shift is clear. The Kingdom is prioritising its energy on what works. Several large-scale schemes may be re-evaluated, deferred, or even cancelled due to strained finances.
Massive undertakings are being shelved or redesigned to adapt to new economic realities and budget approvals. Realistically, only projects with more immediate economic returns or those already furthest along will likely secure the funding they need for timely completion.
Beyond budget pressures, the very scale and complexity of the giga-projects carry inherent risks. As experts and stakeholders are fond of noting, “Giga-projects are scaling too quickly without long-term planning or clear strategy.”
The financial and managerial complexity involved, combined with shifting economic winds, exposes Saudi Arabia to mounting challenges and questions about its capacity to deliver all that has been promised.
Saudi Arabia is undergoing a massive political, cultural, and economic metamorphosis. There have been great gains so far, such as reducing unemployment to historic lows, increasing participation of women in the workforce, strengthening tourism footfall, and rebranding the Saudi image. Yet there are setbacks, more economic than political or social, with multiple ambitious giga-projects stretching the administration’s focus and coffers thin.
The global ripples caused by recent budgetary cuts in Saudi Arabia go well beyond the Arabian Peninsula. They are a reminder of how deeply integrated modern economies have become, how vulnerable ambitious transformation schemes are to commodity price shocks, and how dependent grand visions, no matter how well-financed, ultimately are on the realities of sustained revenue streams.
Yet, even amid sharp cutbacks, the scale of Saudi Arabia’s ambition remains remarkable. The PIF is learning to adapt in a new environment, reaching for international financing, tightening its project portfolio, and recalibrating the pace of its grand design for the Kingdom’s economic rebirth.
Saudi Arabia’s PIF remains a central driver of the Kingdom’s economic transformation, even as falling oil prices force difficult decisions. Spending cuts, project delays, and a shift in priorities reflect the new financial reality, but they also show the PIF’s ability to adapt. While some mega-projects may be scaled back or postponed, PIF is pursuing alternative financing and more focused investments to keep Vision 2030 on track.
The impact of these changes reaches far beyond Saudi Arabia, influencing workers, companies, and supply chains worldwide, and while setbacks may occur, the Kingdom’s long-term ambitions remain intact, testing the PIF’s resilience and its ability to shape the country’s economic future in ways that will matter to partners, investors, and the global economy as a whole.