Saudi Arabia boosts sovereign wealth fund, transfers 8 pc stake in Aramco worth $163.6 bn

Intending to advance its ambitious economic reform agenda, Saudi Arabia has doubled down on its sovereign wealth fund, the Public Investment Fund (PIF).

The kingdom transferred an 8 per cent stake in the oil giant Aramco to PIF, valued at approximately $163.6 billion, according to LSEG data.

Crown Prince Mohammed bin Salman, also known as MBS, highlighted the transfer as part of Saudi Arabia's long-term initiatives to diversify the national economy and expand investment opportunities, aligning with the Vision 2030 plan.

The transfer reinforces PIF's strong financial position and credit rating, as mentioned by the state news agency SPA.

MBS, who chairs PIF, highlighted the move's significance in solidifying the fund's role in driving economic diversification.

Reuters cited Justin Alexander, the director of Khalij Economics and GCC analyst for GlobalSource Partners, who estimated that the transfer would provide PIF with over $9 billion in annual dividend revenue from Aramco.

Crown Prince Mohammed bin Salman's decision aligns with the broader strategy outlined in Saudi Vision 2030, as reported by AP.

The transfer reflects Saudi Arabia's commitment to boosting and diversifying the national economy, showcasing PIF as a central player in driving economic transformation.

PIF Governor Yasir al-Rumayyan announced plans to increase capital deployment to $70 billion annually after 2025.

Aramco clarified in a filing on the Saudi Exchange that the transfer is a private arrangement and would not affecting the company's issued shares, operations, strategy, dividend policy, or governance framework.

Despite this, Aramco has played a crucial role in supporting Saudi Arabia's economic overhaul, with the state now holding 82.186 per cent of the company.

The move indicates the government's plans to invest in economic transformation projects, including the futuristic city NEOM.

PIF's transformation into a global investment vehicle has been fuelled by multi-billion-dollar investments in various sectors, from technology to sports.

The fund, which had approximately $700 billion in assets under management before the recent transfer, aims to grow to $2 trillion by 2030.

The crown prince's proactive approach to investing in megaprojects and diversifying Saudi Arabia's economy is an indication of the nation's shift towards reducing its reliance on oil revenue.

Aramco's profits and global criticisms

Aramco, the world's fourth most valuable firm with a market value of $2 trillion, reported a record $161 billion profit for 2022, making it the highest-ever recorded by a publicly listed company.

However, the profits have faced criticism amid global concerns about climate change.

Activists have raised questions about the environmental impact of burning fossil fuels, even as Aramco announces its 2023 earnings on March 11.

(With inputs from agencies)