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Saudi Arabia to set up $2 trillion fund for post oil era

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Staff writer ▼ | April 4, 2016
Saudi Arabia plans to create a huge sovereign wealth fund for the country’s most prized assets to prepare for a post oil era.
Mohammed bin Salman
Saudis   A huge sovereign wealth fund
The Public Investment Fund (PIF) will eventually control more than $2 trillion and help the kingdom to shift from oil which has seen falling prices strain Saudi Arabia's finances, said Deputy Crown Prince Mohammed bin Salman as cited by Bloomberg.

According to the prince, the wealth fund already holds stakes in companies like Saudi Basic Industries (the world’s second-biggest chemicals manufacturer), and National Commercial Bank (the kingdom’s largest lender).

“Undoubtedly, it will be the largest fund on Earth. This will happen as soon as Aramco goes public,” said the prince.

As part of the new strategy, Riyadh plans to sell shares of state-owned energy company Saudi Aramco and transform it into an industrial conglomerate. The sale of the company is planned by 2018 or even a year earlier.

“IPOing Aramco and transferring its shares to PIF will technically make investment the source of Saudi government revenue, not oil,” the prince said in an interview at the royal compound in Riyadh.

“What is left now is to diversify investments. So within 20 years, we will be an economy or state that doesn’t depend mainly on oil.”

According to the fund’s secretary general Yasir Alrumayyan, PIF is expected to increase the proportion of foreign investments to 50 percent by 2020 from the current five percent.

Saudi Arabia is highly dependent on oil revenues, and is suffering a record high budget deficit which is expected to reach $87 billion this year. The crude price crisis has had an impact on the economy as oil sales account for almost 80 percent of the country’s revenue.

Saudi Arabia’s foreign reserves fell to $640 billion last year from $737 billion in 2014.