NEOM Project Scaled Back: Financial Strain Prompts Saudi Arabia to Slow Construction
Saudi Arabia has scaled back its ambitious NEOM project, according to a report by the US business magazine Bloomberg. Originally projected to be built over 2.4 kilometers of “The Line” will be constructed by 2030, with a maximum capacity of 300,000 people. However, these figures are optimistic estimates and the actual cost of the project has ballooned to three times its original estimate of $500 billion within just a year of construction.
The primary reason for this decision is the escalating cost of the project, which was originally estimated at $500 billion but has now ballooned to three times that amount within just a year of construction commencing. The majority of the funds for the NEOM project come from Saudi sovereign wealth funds, specifically 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. This financial strain is likely due to budget negotiations for 2024, prompting the royal family to slow down construction significantly.
The delay in the NEOM project could tarnish Crown Prince Mohammed bin Salman’s reputation as he is leading Vision 2030 program aimed at diversifying Saudi Arabia’s economy away from oil and gas. Despite this setback, other NEOM districts are still moving forward such as luxury tourism destination Sindalah in Red Sea. However, there are concerns about Saudi Arabia’s ability to host major events like Asian Winter Games in 2029 due to delay in NEOM project.
