The development assumes significance because it essentially diversifies PIF’s sources of funds and it provides it with much needed financial muscles in its efforts to bring about Saudi Arabia’s Vision 2030 plan, which aims to diversify the Kingdom’s markets and wean it away from its oil export driven economy.
As per a source with direct knowledge of the matter at hand, Saudi Arabia’s sovereign wealth fund has raised $11 billion in loan from banks in a move aimed at beefing up its financial muscles before it goes ahead with its plan to diversify and transform the Kingdom’s economy.
Incidentally, initially Saudi Arabia’s Public Investment Fund (PIF) had aimed at getting loans to the tune of $6 billion to $8 billion. That amount has been raised to $11 billion now.
The PIF is charged with delivering Saudi Arabia’s Vision 2030 reform plan, which Riyadh had announced in 2016. The effort is part of an ambitious economic program designed to wean away the kingdom’s dependence on oil exports.
The sovereign wealth fund has also made substantial commitments to technology companies including to gigantic $45 billion tech fund led by Japan’s Softbank. It has also tentatively committed to a planned $20 billion infrastructure investment with Blackstone.
According to a source, the PIF will pay a margin of 75 basis points over the London Interbank Offered Rate for the loan; this is the same rate secured by the Saudi government when it raised a syndicated loan earlier this year.
The debt will diversify PIF’s sources of funding which in the past were asset transfers from the government, capital injections and earnings from existing investments.
Significantly, the PIF is expected to receive tens of billions of dollars from the sale, which could be part or whole, of its stake in Saudi Basic Industries Corp (SABIC) to Saudi Aramco.
With a market capitalization of $98 billion, Riyadh-listed SABIC, is the world’s fourth-biggest petrochemicals company; PIF has a 70% stake in it.