Latest news with #MonicaMalik
Arabian Post
01-07-2025
- Business
- Arabian Post
Sovereign Wealth Fund's Profit Plunge Tests Vision 2030 Resolve
Arabian Post Staff -Dubai Saudi Arabia's Public Investment Fund posted a 60 per cent plunge in net profit for 2024, even as its assets surpassed the US $1 trillion mark, the fund disclosed on 30 June. The drop came amid persistent high interest rates, inflationary pressures, and a wave of impairments tied to escalated costs and shifting operational plans. Net income dwindled to 25.8 billion riyals, down sharply from 64.4 billion riyals in the prior year. This contrast underscored the divergence between headline growth and bottom‑line volatility within Saudi Arabia's principal engine for economic diversification. ADVERTISEMENT Assets under management rose by 18 per cent to 4.321 trillion riyals, up from 3.664 trillion riyals in 2023. The surge came largely from fresh capital injections, including transfers from oil‑linked revenues, plus appreciation in existing holdings, particularly in domestic champions such as Saudi Aramco and Saudi National Bank. Yet, comprehensive income—an accounting measure that factors in unrealised gains and asset revaluations—tipped into negative territory, registering a 140 billion riyals loss following a gain of 138.1 billion riyals the previous year. The swing reflected deep writedowns, tied to project revaluations across the PIF's footprint. Monica Malik, chief economist at Abu Dhabi Commercial Bank, attributed the downturn in part to recalibration of investment strategies. She highlighted how 'prioritisation of some projects and the extension in the timelines of some giga projects could have been a factor for the impairments,' and pointed to rising costs as another pressure point. Among these giga‑projects is NEOM, an ambitious urban megacity on Saudi's Red Sea coast. Backed by hundreds of billions of dollars in PIF funding, NEOM remains central to the fund's strategy, though its scale and timeline have been under increased scrutiny amid cost inflation and changing economic dynamics. Cash reserves stood firm at 316 billion riyals, while group loans edged up to 570 billion riyals, signalling ongoing borrowing to propel expansions. This reflects PIF's dual posture: aggressive investment on one hand, and debt financing on the other. ADVERTISEMENT Historically, PIF has been pivotal to Saudi Arabia's Vision 2030 programme—Crown Prince Mohammed bin Salman's blueprint to reduce national dependence on oil by building world‑class tourism, tech and renewable sectors. Since 2015, the fund's remit expanded from passive equity holdings to sovereign‑directed mega‑investments. By end‑2024, PIF had amassed over US $1 trillion in assets, bolstered by successive Aramco asset transfers. Its investment portfolio spans global holdings—Uber, Boeing, Disney—and domestic ventures like Qiddiya, the Red Sea luxury resort and NEOM. The fund also pursued high‑profile investments, including planned stakes in Heathrow Airport and European hotel chains. Overseeing this expansion has drawn both political and governance scrutiny, reflecting complex trade‑offs under Saudi rules. Despite today's profit contraction, the growth in assets cements the fund's scale and influence. Dividends from Aramco and SNB now fuel a substantial portion of PIF's recurring income, augmenting returns from non‑oil investments. The portfolio writedowns—particularly impairments linked to escalated project outlays—underline broader macroeconomic challenges. High global interest rates have upped the cost of capital for long‑gestating developments, while inflation has pushed construction, labour and materials costs upward. PIF's balance sheet has borne both pressures. Operating amid this headwind, the fund has begun recalibrating timelines and reprioritising capital deployment. Malik's comments suggest PIF faces a complex balancing act: stewarding mega‑projects while preserving fiscal discipline. Illiquidity risk, rising debt and market exposure also feature in ongoing risk assessments. In parallel, PIF is broadening its footprint via bond issuances and global partnerships. According to finance industry disclosures, it is preparing a seven‑year sukuk targeting US $1.25 billion in proceeds. Such moves signal evolving financing strategies that complement traditional government funding and cash reserves. Central to this outlook is Vision 2030. Despite the profit slump, PIF retains its mandate to catalyse non‑oil economic sectors, from tourism to tech to renewable energy. Arab regional peers have pursued similar diversification, but few match PIF's scale. The fund's willingness to shoulder large‑scale writedowns may reflect long‑term thinking: strategic build‑out today, stabilised returns in future decades. Global investors and markets will likely watch upcoming quarterly and full‑year data for signs of recovery or further calibrations. Rising global interest rates remain a wildcard. Additionally, cost overruns in mega‑projects may prompt sharper scrutiny and public debate about deliverables. PIF's holding company, chaired by the Crown Prince, retains political backing, but governance observers continue to emphasise improved transparency and oversight. The fund's decisions now carry wider implications: not just for returns, but as a barometer for Saudi Arabia's Long‑Term economic strategy.
Yahoo
30-06-2025
- Business
- Yahoo
Saudi wealth fund annual profit tumbles 60% as high rates, inflation bite
By Federico Maccioni and Hadeel Al Sayegh DUBAI (Reuters) -Saudi Arabia's sovereign wealth fund's assets exceeded $1 trillion in 2024, but its net profit slumped 60% from a year earlier, it reported on Monday, hurt by high interest rates and inflation as well as impairments on some projects. The Public Investment Fund's net profit fell to 25.8 billion riyals ($6.9 billion), it said in a statement, adding that impairments primarily related to changes to operational plans and increases in budgeted costs. The PIF is steering Saudi Arabia's ambitious economic agenda aimed at weaning the Gulf country's economy off oil. Under the plan, dubbed "Vision 2030", the kingdom has poured hundreds of billions of dollars through the PIF into projects including NEOM, a massive urban and industrial development project nearly the size of Belgium to be built along the Red Sea coast. "The prioritisation of some projects and the extension in the timelines of some giga projects could have been a factor for the impairments," said Monica Malik, chief economist at Abu Dhabi Commercial Bank. "The rising cost of projects has also been a key challenge, and a factor behind the recalibration of the investment programme," she added. Total assets under management rose 18% to 4.321 trillion riyals from 3.664 trillion riyals a year earlier, it said. With a portfolio of investments ranging from date farms to multinational conglomerates, the PIF's sources of income include dividends from key portfolio companies including oil giant Saudi Aramco and the country's biggest lender Saudi National Bank. It reported net profit of 64.4 billion riyals for 2023 in its consolidated statement on Monday. However, its comprehensive income statement showed that the 138.1 billion riyals reported for 2023 in July last year had swung to a loss of 140 billion riyals this year. A comprehensive income statement includes items such as unrealised gains and losses as well as the change in value of some of a company's assets. It said cash remained steady at 316 billion riyals, while group loans and borrowing increased slightly to 570 billion riyals. ($1 = 3.7502 riyals)
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Business Standard
23-06-2025
- Business
- Business Standard
Oman to become 1st Gulf state to levy income tax, aims to cut oil reliance
Oman will become the first Gulf state to introduce a personal income tax from January 2028. The new legislation imposes a 5 per cent tax on individuals earning more than 42,000 Omani rials (approximately $109,000) annually. According to a Bloomberg report citing the state-run Oman News Agency, the measure will impact only around 1 per cent of the population. The policy is part of Oman's broader efforts to reduce its dependence on oil income. Minister of Economy Said bin Mohammed Al‑Saqri stated that the tax was introduced 'to reduce dependence on oil revenue while preserving social spending'. While income tax is standard globally, none of the six Gulf Cooperation Council (GCC) nations currently impose it. Oman's decision breaks with regional norms and signals a major policy shift. Fiscal reform with wider Gulf implications 'While the scope is narrow, it will still be a significant fiscal development in the region,' said Monica Malik, Chief Economist at Abu Dhabi Commercial Bank. 'Oman is looking to progress with fiscal reforms while still remaining competitive. This is especially at a time when high‑net‑worth individuals are moving to the region.' The International Monetary Fund has also cautioned that GCC states may eventually require income taxes as global energy transitions put long-term pressure on oil-dependent budgets. Part of Oman 'Vision 2040' The income tax, formalised through Royal Decree No. 56/2025, supports Oman Vision 2040 — a national agenda to diversify the economy and ensure long-term financial sustainability. The Tax Authority stated that the initiative aims to 'expand income sources and enhance fiscal sustainability', while contributing to wealth redistribution and bolstering the social protection system. Officials said the policy was shaped by a thorough study of income data from government departments. Findings showed that 99 per cent of citizens fall below the tax threshold and will remain unaffected. Deductions tied to social priorities The law will allow for deductions and exemptions based on social criteria, including spending on education, healthcare, housing, inheritance, zakat, and charitable contributions. Karima Mubarak Al Saadi, Director of the Personal Income Tax Project, said Oman is fully prepared for the rollout. 'All requirements for implementing the tax are in place,' she said, noting that executive regulations will be issued within a year. Digital compliance and public readiness An integrated digital system has been developed to encourage voluntary compliance and accurately assess income. This platform will interface with existing government databases to improve transparency and efficiency. Educational materials and public engagement initiatives will be released in phases. 'Training, infrastructure, and legal frameworks are already in place,' Al Saadi confirmed. Strengthening investor confidence and fiscal health In 2024, Oman collected OMR 1.4 billion through corporate tax, VAT, and selective levies. The addition of personal income tax is expected to broaden revenue streams and enhance investor confidence by improving fiscal credibility. 'Oman's income tax could act as a catalyst for other GCC countries implementing the tax as well in the future,' Malik noted.
Mint
23-06-2025
- Business
- Mint
Oman to impose income tax on top earners, becomes first Gulf state to do so. Details here
Oman has announced its plans to become the first Gulf nation to impose an income tax on its citizens, reported the news agency Bloomberg on Monday, 23 June 2025. This strategic move is Oman's efforts to reduce its dependence on earnings from its crude oil exports. Sultanate of Oman's Minister of Economy, Said bin Mohammed Al-Saqri, highlighted the need for the nation to diversify its public revenues to reduce reliance on oil income while maintaining the social spending levels. The government has decided to impose a 5 per cent income tax on people of the nation who have an annual income of 42,000 rials ($109,000) or above, according to the agency report. However, this will not be in effect until 2028, as per a local media outlet. The Ministry also said that this move will mean that the top 1 per cent of the economy's earners will have to pay tax in Oman, as per the report. According to the news agency's report, no other Middle Eastern Gulf country that is part of the Gulf Cooperation Council (GCC) has income tax on its citizens. Nations like Saudi Arabia, the United Arab Emirates, and Qatar, apart from earning high revenues from oil exports, also earn from foreign workers. Oman's move to impose an income tax on its citizens is expected to be closely monitored by the neighbouring Middle Eastern nations. 'Oman is looking to progress with fiscal reforms while still remaining competitive. This is especially at a time when high-net-worth individuals are moving to the region,' Monica Malik, the chief economist at Abu Dhabi Commercial Bank, told the news agency. 'While the scope is narrow, it will still be a significant fiscal development in the region.' Saudi Arabia and Bahrain are the two outliers who are expected to have fiscal deficits this year, compared to other GCC nations, which are likely to have solid fiscal balances, according to the agency report. The report also cited the International Monetary Fund (IMF), which said that Gulf nations will eventually need to impose some taxes to diversify their revenues in case the demand for oil drops in the future. The Sultanate has raised funds for the government through a $2 billion initial public offering of its state energy company's exploration and production unit in 2024, as the nation looks for other sources of income for the economy. Oman's income tax 'could act as a catalyst to other GCC countries implementing the tax as well in the future,' Malik told the news agency. According to the OEC data, Oman exported crude oil worth $29.3 billion in the year 2023, with its top importer being China. This export data marks the Gulf nation as the 15th largest crude petroleum exporter in the world.
Zawya
09-06-2025
- Business
- Zawya
Saudi Arabia's first-quarter GDP grows by 3.4%, beating flash estimates
Saudi Arabia's economy grew by more than expected in the first quarter of 2025, according to government data estimates, with lower oil prices impacting the economy less than previously forecast. First-quarter GDP grew by 3.4% compared to the same quarter of the previous year, beating flash estimates of 2.7% released in May by the Saudi General Authority for Statistics. "The upward revision was both due to a smaller annual contraction from the oil sector and stronger private sector growth," said Monica Malik, chief economist at Abu Dhabi Commercial Bank. Oil GDP shrank by 0.5%, while initial flash estimates had shown it contracting by 1.4%. Non-oil growth reached 4.9% compared to estimates last month pointing to a 4.2% increase. The impact of lower oil prices may have been blunted by the kingdom's increase of oil output. The kingdom faces a widening budget deficit with the International Monetary Fund saying Riyadh needs a price of oil of over $90 per barrel to balance its books compared to prices of around $60 per barrel in recent weeks. Saudi Arabia, the world's biggest oil exporter, lowered its July prices for Asian buyers at the beginning of June, after Organization of the Petroleum Exporting Countries and allies, known as OPEC+, hiked output for a fourth month. OPEC+ agreed to another big output increase of 411,000 bpd for July, having increased output by the same amount in May and June. Saudi Arabia is in the midst of a costly economic transformation program known as Vision 2030 that aims to wean the economy off oil dependency and has been funneling billions into massive new development projects. Saudi Finance Minister Mohammed Al-Jadaan said the kingdom would "take stock" of its spending priorities in response to a significant decline in oil revenue, the Financial Times reported in May. "We also expect to see some pullback in government spending to limit the widening of the fiscal deficit, which will likely weigh on non-oil growth," said Malik. Daniel Richards, senior economist at Emirates NBD, said that still, the bank believes that spending will remain high. "There is still sufficient project spending already in progress that growth will remain supported through this year and next at least," he wrote in a note. Saudi Arabia is committed to hosting several large international events, each of which require significant spending on construction and development. These include the 2029 Asian Winter Games, set to feature artificial snow and a man-made freshwater lake, and the 2034 World Cup, for which 11 new stadiums will be built and others renovated. Saudi Arabia's 2025 fiscal deficit is forecast at around 101 billion riyals ($27 billion). (Reporting by Pesha Magid; Editing by Toby Chopra)
