King of Saudi Arabia, Salman bin Abdulaziz Al Saud (R) and Crown Prince of Saudi Arabia Mohammad Bin Salman (L). (Photo credit: Bandar Algaloud/Anadolu Agency)
Saudi Arabia has signaled a shift in how it provides financial assistance to neighboring countries, making future assistance contingent on promises to revamp their economies.
The Saudi finance minister announced on 18 January that the country is replacing the unconditional grants and deposits it traditionally made to allies in favor of more conditional direct grants.
At the World Economic Forum in Davos, Switzerland, Saudi Arabia’s Finance Minister, Mohammed Al-Jadaan, said, “We are changing the way we provide assistance and development support.”
“We used to give direct grants and deposits without strings attached and we are changing that, we are working with multilateral institutions to actually say we need to see reforms,” the official added.
With grants and deposits totaling billions of dollars, Saudi Arabia is the largest oil exporter in the world and has long supported the region’s struggling economies.
The kingdom has been Egypt’s largest single supporter for many years, and five years ago, it led a group of other powerful allies in rescuing Bahrain. It has intervened more recently to aid in stabilizing nations like Pakistan.
Saudi state media stated earlier this month that the country could increase its investments in cash-strapped Pakistan to $10 billion from the $1 billion announced in August and raise the cap on deposits into the Pakistan central bank to $5 billion.
In June, Saudi Arabia announced plans to lead investments totaling $30 billion, signed deals with Egypt for $7.7 billion – including one to develop a $1.5 billion power plant – and helped an ally struggling with a falling currency and a lack of foreign money.
According to the Saudi Press Agency (SPA), Crown Prince Mohammed bin Salman (MbS), the Chairman of the Fund’s Board of Directors, said that the value of the targeted investments amounted to 90 billion riyals ($24 billion) in various sectors.
The establishment of companies will achieve attractive returns in the long term, maximizing the fund’s assets and diversifying the kingdom’s income.
In turn, officials in the targeted Arab countries welcomed the crown prince’s announcement, describing it as showing the extent of the reality of joint economic solidarity and achieving the interests of nations and their peoples in the Arab region.