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DUBAI – Saudi Arabia wants to demystify its finances.

The kingdom is working on creating a consolidated balance sheet of its assets and liabilities which will include items currently kept off the oil-rich economy’s books, including the investments and debts of its powerful sovereign wealth fund.

“The main purpose of this programme is to have a financial equivalent of an MRI of the government balance sheet,” a Finance Ministry spokesman told Reuters, adding that it would include assets and liabilities that are currently “off-balance sheet”.

Saudi Arabia’s Crown Prince and de facto ruler Mohammed bin Salman has put Public Investment Fund (PIF), Saudi Arabia’s main sovereign wealth fund, at the centre of reforms aimed at diversifying the economy of the world’s top oil exporter away from fossil fuel.

Under the prince’s chairmanship, PIF has transformed from a sleepy sovereign wealth fund into a global investment vehicle making multi-billion dollar bets on hi-tech companies such as Uber as well as other equity investments and pledging tens of billions of dollars to funds run by Japan’s Softbank.

Its financial statements are not published and it does not feature in the kingdom’s budget, which is publicly available.

Gulf countries don’t typically publish information about their overall debts and assets but the PIF’s riskier investment profile and infusion of state funding have made its opacity an issue for some investors.

“Transfers of wealth from liquid pools of assets like central bank reserves into PIF’s less liquid (and less transparent) investments increases the overall risk profile of the public sector balance sheet,” said Kirjanis Krustins, a director in Fitch’s sovereign team.

“Debt investors would tend to see the government and its key government related entities such as PIF as representing substantially the same risk. Thus the levering up of the broader Saudi complex could at some point impact the government’s own borrowing costs,” he said.

The government media office did not respond to a request for comment.

Aramco billions A Saudi woman walks at the Saudi stock market (Tadawul), in Riyadh, Saudi Arabia.Reuters

The government started working in the second half of last year on the so-called Sovereign Asset and Liability Management (SALM) framework and the spokesman said it was a ‘long-term project’ with no decision yet made on when and how its results would be disclosed.

“If we use benchmarks we will see countries spent a couple of years to implement the consolidation phase,” he said of the project.

The PIF’s finances are formidable.

Its assets have swelled to $400 billion as of 2020 from $150 billion in 2015, with the fund bolstered by an expected $70 billion payday from Saudi Aramco, the state oil company, for PIF’s stake in a petrochemical giant and a $40 billion transfer from the central bank’s foreign reserves.

It was also the recipient of nearly $30 billion in proceeds from Aramco’s initial public offering in 2019.

The fund has raised $21 billion in loans between 2018 and 2019, and is finalising a new facility expected to be over $10 billion in size, sources have said.

The ‘normal’ way Saudi Arabia’s Crown Prince Mohammed bin Salman.Reuters

Despite Saudi’s oil wealth, creating enough jobs for the kingdom’s young population is one of the biggest challenges facing Prince Mohammed, known in the West as MbS.

The government has been pushing through economic policies since 2016 aiming to create millions of jobs and reduce unemployment to 7% by 2030. But fiscal austerity to contain a yawning deficit has slowed investment, and the coronavirus crisis last year pushed unemployment up to a record 15.4%.

To get the deficit down from an eye-watering 12% of GDP last year to a shortfall of 4.9% by the end of this year, Riyadh has slashed capital spending.

It is relying instead on the PIF to fund some of the major infrastructure projects to help boost growth, including NEOM, a $500 billion high-tech business zone, and the recently announced “The Line”, a 1 million inhabitants carbon-free city in NEOM, expected to cost between $100 billion and $200 billion.

PIF plans to inject at least 150 billion riyals ($40 billion) annually into the local economy until 2025, and to increase its assets to 4 trillion riyals ($1.07 trillion) by that date, Prince Mohammed has said.

“MBS understands that unless the economy grows at a rate above 6.5-7%, the youth unemployment rate will stagnate or grow – and that is a ticking time bomb,” said Khaled Abdel Majeed, MENA fund manager at London-based SAM Capital Partners, an investment advisory firm, commenting about transfers of state funds to PIF.

“Doing things the ‘normal’ way through ‘normal’ channels will take more time than is available.”

Filed under finances ,  Mohammad bin Salman ,  oil ,  saudi arabia ,  2/23/21

News Source: New York Post

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3 Dividend Stocks That Could Make You Rich Over the Long Term

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There's little question that owning quality stocks and holding them is the surest path to long-term financial security. Solid dividend payers can help boost those results, increasing the value of a portfolio at regular intervals like clockwork. Adding an investing timeline of years, if not decades, allows the power of time and compounding to work for you. This creates a virtual trifecta of wealth creation.

© Provided by The Motley Fool 3 Dividend Stocks That Could Make You Rich Over the Long Term

On this clip from Motley Fool Live, recorded on Feb. 12,"The Wrap" host Jason Hall and contributors Danny Vena and Jamal Carnette recommend three dividend stocks that could make investors a fortune over the long term.


Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Apple and Microsoft. Jamal Carnette, CFA has no position in any of the stocks mentioned. Jason Hall owns shares of CareTrust REIT. The Motley Fool owns shares of and recommends Apple and Microsoft. The Motley Fool has a disclosure policy.

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Jason Hall: I've got one that I'm going to grab real quick here that we can all chime in on. This is Richard Oz, "Creating a dividend growth portfolio for young adults should lead to compounding wealth creation later in life." Preach it, preach it. "Can you comment on portfolio creation for young adults?"

This is what I want to do. We are going to answer your question here each of us. Give us your best dividend growth companies in your respective wheelhouse.

I'm going to use the stock that I just talked about as my potential 10-bagger over the next 10-15 years, CareTrust REIT (NASDAQ: CTRE), it's a $2 billion dollar real estate investment trust, pays a 4% dividend yield at recent prices. They've increased the dividend every year since going public. They've doubled the dividend in five years. It's a $2 billion dollar company with incredible leadership in an industry that's going to probably double in size or more over the next decade, and it's going to keep growing from there. Who wants to go next here, Jamal?

Jamal Carnette: I'll jump in here and for a long-term, I look at long-term drivers whenever I'm trying to buy stocks, particularly if you're looking at buying stocks for kids or children. I think a stock that has a long runway. It's obviously one of the bigger stocks right now, Microsoft (NASDAQ: MSFT).

But right now, you're sitting at multi-decade returns from the Internet of Things and from just increased cloud usage. I remember, I guess it was many decades ago, when they started to institute their dividend and it's grown like a weed ever since. When you're looking to buy stocks for young kids, and you're looking for those dividend growers with multi-decades worth of growth story, and I think Microsoft with the dividend it currently pays now, it's low, but that will continue to grow rather significantly.

Hall: I love that. You don't have to find a high yield, right?

Carnette: Right.

Hall: A lower yield but enormous double-digit annual [laughs] growth can really, really pay off over time because it also signifies a company that's growing its cash flows so that's really important. Danny, bring us home here on your favorite dividend growth stock.

Danny Vena: When you talk cash flow, it's hard to talk about cash flow without talking about my favorite dividend stock which is Apple (NASDAQ: AAPL). If you look at Apple since it reinstituted its dividend, the dividend that it pays, even though the yield is very low, the reason the yield is low is because the company has grown so much, the stock price has grown so much, the market cap has grown so much, but the dividend has more than doubled.

I would say if you look at the things that are going on with Apple right now, they've got nearly a billion iPhones out in the wild. Estimates are that about 350 million of those iPhones are in the window to be replaced. The more iPhones you get out there, the larger that market grows, the more people that are going to be interested in buying wearables, the more people are going to be interested in hooking up into Apple's ecosystem of services, which keeps getting larger every year. I think that for the next decade, at least, you really would be hard-pressed to find a better, more secure dividend stock than Apple.

Hall: Absolutely love it guys. Well, there you have it. We have CareTrust REIT, Microsoft, and Apple. I think those are three [laughs] really strong choices here.

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