High Interest Rates and Project Impairments Hit PIF’s Bottom Line

The Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund, reported a dramatic 60% drop in net profit for 2024, with earnings falling to 25.8 billion riyals ($6.9 billion) from 64.4 billion riyals the previous year.

The fund attributed the downturn to persistently high global interest rates and inflation, which increased borrowing costs and squeezed returns.

Additionally, impairments on select projects, largely tied to changes in operational plans and rising budgeted expenses, further eroded profitability.

Asset Growth Continues Despite Profit Slump

While profits tumbled, PIF’s total assets grew robustly, rising 18% to 4.321 trillion riyals ($1.15 trillion) by year-end 2024, up from 3.664 trillion riyals in 2023.

This asset expansion underscores the fund’s growing market presence and its central role in Saudi Arabia’s economic diversification strategy.

PIF’s diverse portfolio, spanning sectors from agriculture to major multinationals, continues to generate significant revenue streams, including strong dividends from flagship holdings like Saudi Aramco and Saudi National Bank.

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Despite the profit plunge, PIF’s asset base now exceeds $1 trillion, making it one of the world’s largest sovereign wealth funds and a central player in the kingdom’s push to diversify away from oil.

Vision 2030 Ambitions Face Economic Headwinds

PIF remains a cornerstone of Saudi Arabia’s Vision 2030 plan, tasked with reducing the kingdom’s reliance on oil through massive investments in new sectors and giga-projects such as NEOM.

However, the fund’s impairments were primarily linked to project reprioritizations and extended timelines for some of these large-scale initiatives.

Analysts note that escalating project costs and delays have forced a strategic adjustment, testing the resilience of the Vision 2030 agenda in a challenging macroeconomic environment.

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Comprehensive Income Swings Into the Red

Beyond the headline profit decline, PIF’s comprehensive income statement revealed deeper volatility. The fund swung from a 138.1 billion riyal gain in 2023 to a 140 billion riyal loss in 2024, reflecting unrealized losses and fluctuations in asset values.

Despite these setbacks, PIF maintained financial stability, with cash reserves steady at 316 billion riyals and a debt ratio unchanged at 13 percent.

Strategic Shifts and Future Outlook

In response to market pressures, PIF has shifted its investment strategy, increasing its focus on domestic projects and reducing international holdings from about 30 percent to 18-20 percent of its portfolio.

The fund also revised its 2030 asset management target upward, aiming for $2.67 trillion in assets after stronger-than-expected growth. While high interest rates and project impairments have dented short-term profitability, PIF’s expanding asset base and strategic pivots position it to remain a key driver of Saudi Arabia’s economic transformation.