Ends, ways and means for Riyadh’s shift from mega-projects to portfolio rationalisation, February–September 2026
ABSTRACT
On 15 April 2026 Saudi Arabia’s Public Investment Fund (PIF) approved a 2026–2030 strategy that moved its objective from “rapid growth” to “sustainable value creation”. This piece reads the revision as a strategy with a stated end, Vision 2030 kept as a target, and a changed way of reaching it. It argues that the shift began before the war of 28 February 2026, with the late-2024 NEOM review and capital-expenditure cuts tested with investors in February, and that the war accelerated it by squeezing the state budget. Using PIF statements, press reports and Ministry of Finance quarterly data, it sets out four steps, the cancellation cost they carry ($16 billion at NEOM) and the principal risk: a 2027 growth assumption that depends on Hormuz.
1. Where the advantage sits
The revision replaces mega-project logic with portfolio logic. Mega-project logic here means directing oil revenue into large physical investments that each carry political priority and whose timetables follow that priority. Portfolio rationalisation means a fund ranking projects by financing cost, return horizon and external commitments. It is observable through three instruments: cuts in capital expenditure, extended timetables and terminated contracts. Measuring at these three levels replaces the binary question of whether a project was cancelled.
Moshashai, Leber and Savage (2020) place Vision 2030 and the National Transformation Programme within Saudi fiscal reform; the implication for 2026 is that diversification targets cannot be assessed apart from the budget and the PIF balance sheet that finance them. Hvidt (2011) argues that Gulf states adopted a market-friendly “Dubai model” without questioning neo-patrimonial governance. The 2026 revision fits that pattern: it was made through a PIF strategy document and contract decisions, without legislation or public debate.
Riyadh’s advantage lies in control over its own deadlines. Expo 2030 and the 2034 World Cup have dates fixed by external bodies, and postponing them would breach international commitments. The 2030 target for The Line was set by the Saudi leadership and can be rewritten without breaching any external commitment. Under portfolio logic, cuts start where postponement is cheapest, and loosening The Line’s timetable follows that ranking.
2. Saudi Arabia’s position
The sequence predates the war. According to AGBI, the PIF was testing its 2026–2030 strategy with investors in February 2026, cuts of up to 15% in capital expenditure were under discussion, Expo 2030 and the 2034 World Cup topped the priority list, and NEOM work had been suspended after a review at the end of 2024 (AGBI, 2026). The strategy approved in April designated the same two events as “critical path” projects, and PIF Governor Yasir Al-Rumayyan said The Line need not be completed by 2030 (Ali, 2026). Because the sources do not give the final April cut, the war’s effect on its depth cannot be measured; what can be defended is that the war may have affected the speed and scope of the transition, not the choice of priorities.
The PIF balance sheet was under pressure before the war. Its 2025 consolidated profit was SAR 65.2 billion ($17.4 billion), loans and borrowings rose 27.2% to SAR 725.3 billion, equities recorded a SAR 112.8 billion fair-value loss, and assets under management exceeded $900 billion (Foreman, 2026).
The war’s contribution runs through the state budget. In the second quarter of 2026 revenue was SAR 338.8 billion, spending SAR 373.1 billion and the deficit SAR 34.3 billion; the first-half deficit reached SAR 160 billion, all of it debt-financed, and financing costs rose 41% year on year in the quarter (Arab News, 2026a). The plan approved in January projected a full-year deficit of SAR 165 billion (Noon Post, 2026), so about 97% (160/165) of the annual target was reached in six months; the ratio is the author’s calculation. In July Fitch cut its 2026 growth forecast from 4.8% to 0.6% and estimated the fiscal break-even oil price at $94 a barrel (Enterprise AM, 2026). When the state closes its own deficit with debt, its room to inject capital into the PIF narrows. The sources do not report state transfers to the PIF, so the size of this squeeze cannot be measured, only its direction.
3. Step one: Protect the externally fixed dates
The first step ring-fences Expo 2030 and the 2034 World Cup. Their dates are the only ones in the portfolio that Riyadh cannot move without an international cost, so capital and contractor capacity should be assigned to them first. The trade-off is that projects tied to Vision 2030’s domestic narrative, The Line above all, absorb the residual cut. The indicator is whether tenders for the two events continue on schedule through 2027.
4. Step two: Cut at contract level and price the exit
Semafor reported on 7 June 2026 that NEOM contract cancellations would cost SAR 60 billion ($16 billion) over 2026–2030, that $64 billion had been spent on NEOM to date, and that a $4.7 billion Webuild contract had been cancelled; in April Al-Rumayyan had said no project was cancelled (Martin, 2026). The two statements describe how the revision works: official language keeps the project name and speaks of timetables, while scope shrinks contract by contract. On Semafor’s two figures the cancellation cost equals a quarter (16/64) of the spending to date; the ratio is the author’s derivation. Exit is itself costly, because the PIF keeps carrying part of the payment burden through 2030. The way forward is to phase terminations so that cancellation payments fall in years with lower debt-financing needs. The indicator is the annual profile of cancellation payments, if the PIF discloses it.
5. Step three: Keep the budget and the PIF from borrowing against each other
The two financing channels, the state budget and the PIF balance sheet, tightened at the same time. A coherent strategy assigns each channel a role: the budget finances recurrent spending and the critical-path events, while the PIF funds only projects whose return horizon matches its own borrowing costs. The trade-off is slower delivery of projects that fit neither channel. The indicator is the growth of PIF borrowing in its 2026 results against the 27.2% recorded for 2025.
6. Step four: Favour near-term returns linked to energy supply
Portfolio logic predicts that projects with near-term returns and links to energy supply are more likely to survive than real-estate-heavy mega-projects. The $2 billion intergovernmental agreement for 2,000 MW of solar power signed in Riyadh on 3 February 2026 during President Erdoğan’s visit (CNBC-e, 2026) is a test case. No source documents its implementation, so this remains an expectation; the indicator is whether the project reaches financing and tendering.
7. The principal risk
The 2027 pre-budget statement of 30 September 2026 projects spending of SAR 1.392 trillion, revenue of SAR 1.202 trillion and a deficit of 3.6% of GDP (Asharq Al-Awsat, 2026). The gap is SAR 190 billion (1,392 − 1,202), the author’s calculation. The statement assumes 12.8% real growth in 2027 after a projected 3.6% contraction in 2026 (Arab News, 2026b). On the author’s reading, which the statement does not spell out, that assumption requires a recovery in oil output and therefore an easing of the Hormuz transit restriction. If the restriction persists, revenue falls short, the deficit widens beyond plan, and new timetable extensions and contract terminations outside the critical path become likely. The strategy then shifts from rationalisation to retrenchment.
8. Outlook: Türkiye, Saudi Arabia and the World
For Saudi Arabia, the decisive variable is whether the pre-budget assumptions hold. The first October data point is the 4 October meeting at which seven OPEC+ countries set November output (ANI, 2026). The IMF–World Bank Annual Meetings in Bangkok on 12–18 October are the second, when Saudi growth and financing prospects are discussed with international institutions (International Monetary Fund, 2026). If oil output recovers in 2027, the April strategy can continue at its current level of cuts; if it does not, further cuts outside Expo 2030 and the World Cup should be expected.
For Türkiye, the concrete item is the 2,000 MW solar agreement. Under portfolio logic, an energy-supply project with a near-term return should rank above real-estate projects; the indicator for Ankara is whether it moves to financing and tendering during 2027.
Globally, the Webuild case shows that contract risk for foreign contractors in Saudi projects now extends beyond timetable risk. Through 2027, international construction and services firms may find their Saudi exposure concentrated in Expo 2030 and World Cup tenders.
9. Conclusion
The second draft of Vision 2030 is not a product of the war. The late-2024 NEOM review, the February 2026 test of capital-expenditure cuts of up to 15%, and the PIF’s 2025 fair-value losses and borrowing growth had built the case for revision before 28 February. The war accelerated the process through a budget that reached almost its full-year deficit in six months and through rising financing costs, which makes a return to mega-project timetables harder. The strategy that follows keeps project names, narrows scope at contract level and gives priority to two events whose dates are set abroad. Its limitation is that PIF project-level spending and state transfers are not public, so the war’s separate contribution cannot be quantified.
SOURCES
AGBI. (2026, February). Saudi PIF tests revised strategy as it seeks private sector billions. https://www.agbi.com/giga-projects/2026/02/saudi-pif-to-test-new-strategy-with-investors/
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Hvidt, M. (2011). Economic and institutional reforms in the Arab Gulf countries. The Middle East Journal, 65(1), 85–102. https://doi.org/10.3751/65.1.15
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Moshashai, D., Leber, A. M., & Savage, J. D. (2020). Saudi Arabia plans for its economic future: Vision 2030, the National Transformation Plan and Saudi fiscal reform. British Journal of Middle Eastern Studies, 47(3), 381–401. https://doi.org/10.1080/13530194.2018.1500269
Noon Post. (2026, 7 January). Saudi borrowing plan: What it reveals about the cost of “Vision 2030”. https://english.noonpost.com/p/saudi-borrowing-plan-what-it-reveals
Furkan Mahmut Tameroglu