Wealth Fund, Spending and IPO: Key Remarks by Prince Mohammed

  • Rare TV appearance for Deputy Crown Prince Mohammed Bin Salman
  • Wide-ranging interview one year after ’Vision’ announcement

Deputy Crown Prince Mohammed Bin Salman.

Photographer: FAYEZ NURELDINE/AFP via Getty Images

Saudi Arabia’s Deputy Crown Prince Mohammed Bin Salman appeared in a rare television interview aired on Tuesday night, one year after he launched his so-called Vision 2030 program to overhaul the kingdom’s government and economy.

During the hour-long interview, Prince Mohammed discussed the economy, the kingdom’s sovereign wealth fund and the planned initial public offering of state oil giant Saudi Arabian Oil Co., known as Aramco. Here are the main points from the interview, conducted by Saudi journalist Dawood Al-Sharyan and broadcast on MBC and the Saudi state television:

No Reserves in IPO

  • Saudi Arabia will continue to own its oil reserves and will only sell shares in the concession of Aramco.
  • The size of the IPO, planned for 2018, will depend on demand, but it won’t be “very far from” the planned size of up to 5 percent.
  • The listing is necessary for economic development, the prince said. He dismissed internal opposition to the plan as "communist, socialist thinking that everything needs to be owned by the state."

Domestic Investment Binge

  • The Public Investment Fund, which Prince Mohammed wants to turn into the world’s largest sovereign wealth fund, will invest between 50 to 70 percent of the proceeds of the Aramco IPO domestically. The fund plans to invest 500 billion riyals in the kingdom within 3 years of the Aramco IPO, he said.
  • Top sectors the fund will target inside the kingdom include mining, entertainment and defense; the kingdom will make local content mandatory in all arms deals.
  • Saudi Arabia spends between $50 to $70 billion annually on defense “and 99 percent of that is outside the kingdom,” he said.

State Support

  • The number of Saudi citizens who are entitled to state support is a little less than 10 million, the prince said. The government is working on compensating them for cuts to state energy and water subsidies through a cash payout program. So far, about 11 million people -- half the Saudi population - are registered under the program, according to official statements.
  • “We’re trying to include the largest categories possible so there isn’t a strong effect on citizens,” the prince said.
  • Prince Mohammed also touched on the kingdom’s housing shortage, a sensitive subject among citizens. The government plans to offer hundreds of thousands of free homes and a million more with some form of low-cost financing, he said.

Impact on Economy

  • The economic reforms the country has undertaken recently have slowed growth, but Saudi Arabia avoided a recession. Non-oil revenue increased more than expected in the first quarter.
  • “Any reform process will of course have side effects,” the prince said.
  • The debt-to-GDP ratio won’t rise higher than 30 percent, a level which "isn’t a problem" but will allow the state to continue spending on development through borrowing, he said. Gross debt-to-GDP ratio was 12.4 percent in 2016, according to IMF data.
  • A planned 200 billion riyal stimulus package “will greatly encourage the private sector.”

Restored Allowances

  • The prince dismissed the idea that popular pressure had pushed the government to restore state employee allowances and benefits, which were trimmed last year. The restoration of the allowances in a royal order last month was due to economic reforms bearing fruit, not pressure, he said.
  • “The deficit fell 44 percent below our projections. Why? Because of austerity measures.”
  • The suspension of allowances was temporary and was to be reviewed periodically. “It was reviewed in the appropriate time after our oil revenue improved," he said.

— With assistance by Wael Mahdi, and Glen Carey

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