IMF Believes Even a $1 Trillion Saudi Sovereign Wealth Fund is Not Enough

Posted on 09/12/2019

Saudi Arabia’s Public Investment Fund (PIF) is a key component of the Vision 2030 plan. Saudi Arabia continues to enact measures and stimulate companies to diversify the country’s economic base of oil and other chemicals. The PIF plays a role in that its potential investment returns could provide a meaningful alternative stream of revenue for the government. Vision 2030 places significant emphasis on expanding PIF well beyond its existing capital base. Sovereign funds often provide income in many forms back to the recipient government. The International Monetary Fund (IMF) released its timely Saudi Arabia economy report in which even if “Saudi Arabia were to grow its PIF from its current $300 billion to this scale, financial returns alone would not constitute adequate income replacement in a post-oil world. Oil production of 10 million barrels per day, valued at $65 per barrel, translates to annual oil revenues of about $11,000 per Saudi at present.”

The IMF assumes that a population of Saudi Arabia growing to about 26 million by 2030, accumulated assets of US$ 5 to US$ 7 trillion would be necessary to generate the same level of per capital revenues from financial assets. The IMF got population data from the General Authority of Statistics (GASTAT), in which the 2018 population of Saudi Arabia was 20.1 million. The IMF put the annual population growth rate at 2%. The author of the report calculates a per capita annuity of US$ 11,000 per person for real returns ranging from 4 to 6 percent.

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