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Fitch rates Saudi Arabia’s PIF ‘A’, in line with sovereign

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Fitch Ratings on Wednesday assigned Saudi Arabia’s Public Investment Fund (PIF) an ‘A’ credit rating in line with the sovereign, given its strong support for PIF and the fund’s central role in driving the kingdom’s diversification agenda.

Fitch said it expects PIF to gradually tap the international debt markets while continuing to benefit from stable capital flows from the government “during the growth stage of its operations.”

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Reuters reported last year that PIF was setting up an environmental, social and governance (ESG) framework under which it is likely to issue multibillion-dollar green bonds.

Its governor, Yasir al-Rumayyan, said in September PIF was working with BlackRock on the framework and planned to announce its debut green bonds “soon,” without providing details.

PIF, which has about $480 billion in assets under management, is the main vehicle for boosting Saudi Arabian investments at home and abroad as Crown Prince Mohammed bin Salman, who chairs the fund, seeks to diversify the kingdom’s oil-heavy economy through his Vision 2030 strategy.

Fitch said PIF’s total assets at the end of 2021 were equivalent to 57 percent of Saudi Arabia’s gross domestic product.

“For the last three years the government’s cash injections to PIF totaled SAR 288.8 billion ($77 billion) and represented on average close to 10 percent of the fund’s total assets,” Fitch said.

“PIF has received also non-monetary grants, including transfer of land plots for planned capital investments. This active support is mirrored in the high share of equity funding on average at about 90 percent of its total assets.”

Any distress at the sovereign wealth fund would have “severe political repercussions for the government and endanger the implementation of its strategic agenda,” creating strong incentives to avoid a default of PIF, Fitch said.

The fund has low outstanding debt levels and is net cash positive.

“This makes the prospect of financial distress remote, which we also believe the state has a strong incentive to avoid given the impact it would have on international financial markets and the borrowing capacity of the state or other Saudi GREs,” Fitch said.

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