Saudi Arabia’s ambitious NEOM project is facing significant challenges as the monarchs have decided to drastically scale back the project, according to reports from Bloomberg. Originally estimated at $500 billion, the project has now ballooned to three times that amount within just a year of construction commencing. One of the main reasons for this decision is the escalating cost of the project, which has strained Saudi sovereign wealth funds, particularly the Public Investment Fund, which has seen its cash reserves plummet to around $15 billion – the lowest level since the start of the pandemic in 2020.
The majority of funding for NEOM comes from Saudi sovereign wealth funds. The delay in construction due to budget negotiations for 2024 has forced the royal family to slow down construction significantly, prompting doubts about Crown Prince Mohammed bin Salman’s ability to lead Vision 2030 program aimed at diversifying the kingdom’s economy away from oil and gas. Despite this setback, other NEOM districts such as luxury tourism destination Sindalah in Red Sea are still moving forward.
The delay in NEOM project raises concerns about Saudi Arabia’s ability to host major events like 2029 Asian Winter Games. While some parts of the project are still moving forward, including Sindalah completion, questions remain about NEOM’s future as it faces economic challenges and resource depletion. The scaled-back version of NEOM will only accommodate a maximum of 300,000 people by 2030, which is considered an optimistic estimate by a high-ranking employee.