Saudi wealth fund 'shopping spree' disguises deep-seated economic pain

Spending 'nest egg'

The painful austerity drive could heighten public scrutiny of such spending - especially after VAT, introduced just over two years ago, is tripled to 15 percent from July.

"Companies are happy to see their stocks in demand and share prices buoyed," Karen Young, a scholar at the American Enterprise Institute, told AFP.

"However, it is more important to think about how Saudi citizens view their savings and collective national nest egg being spent on international equity markets at a time of a national economic crisis."

Shopkeepers in Riyadh privately wonder why the crucial investments were not instead used to prop up struggling small and medium enterprises choked by the pandemic.

The investments are also unlikely to soothe concern among young Saudis worried about finding jobs amid already high youth unemployment.

In an absolute monarchy where few publicly question official decrees, columnist Khalid al-Sulaiman wrote in a pro-government newspaper that the austerity measures will have a "significant effect on society's purchasing power".

"A football club, entertainment, mega projects. Throwing money at all this is absolutely unnecessary at a time of deep austerity," said one Saudi government worker, who also works part-time for a ride-hailing app to supplement his income.

Such is the economic anxiety that some Saudis dubbed as "insensitive" a light-hearted video by entertainment chief Turki al-Sheikh, in which he breaks a television screen out of frustration after losing a Playstation game.

The central bank's foreign reserves saw a sharp fall in March and April, with the government saying $40 billion had been transferred to the PIF to fund its stake-buying spree.

The reserves, which tumbled to about $450 billion in April, a multi-year low, are expected to be further depleted to finance a growing budget deficit, analysts say.

'Big bet'

De facto ruler Crown Prince Mohammed bin Salman has transformed the once-torpid PIF into a key investment vehicle to develop mega projects to diversify the oil-reliant economy, while also building an international portfolio of investments.

In a statement, the PIF described itself as a "patient investor with a long-term horizon".

"The PIF is making big bets on a few stocks," said Ali Shihabi, a Saudi analyst and author.

"Smart or not, we'll only know when we look in the rear-view mirror."

Some of those "tactical" investments in undervalued assets, including the struggling cruise operator Carnival, chime with Saudi Arabia's goal of developing its tourism and entertainment sectors from scratch, Shihabi added.

The PIF reportedly struggled in the past to attract a cruise liner to the Red Sea, where the kingdom seeks to develop a mega tourism project as well as NEOM, a $500 billion futuristic megacity.

But many of the other acquisitions are "unlikely to yield a substantial return over the short run", said Robert Mogielnicki, a resident scholar at the Arab Gulf States Institute in Washington.

The Facebook investment has raised concern among US watchdogs after two former Twitter employees were charged last year with spying for Saudi Arabia.

"I'm particularly concerned about the large Facebook stock buy given that we already know the Saudis had agents at Twitter to spy on Saudi dissidents," Ben Freeman, a director at the Washington-based Center for International Policy, told AFP.

"Would the company remove a disinformation campaign run by one of its stakeholders?"

Facebook did not respond to a request for comment.