The rationale for Saudi Arabia’s Riyadh renaissance

The plans hope to make Riyadh the hub for one of the 10 biggest urban economies in the world. (Arab News)
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Updated 03 March 2021
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The rationale for Saudi Arabia’s Riyadh renaissance

  • Scale of vision for future development of Saudi capital may be mind-boggling but achievable and ultimately beneficial
  • A plan under preparation should provide solutions to the economic, social, demographic and financial challenges involved

DUBAI: The scale of the vision for the future development of Riyadh — unveiled by Saudi Arabia’s Crown Prince Mohammed bin Salman at last month’s Future Investment Initiative (FII) conference — is mind-boggling.

By 2030, the Saudi capital will at least double in size from its current population of around 7.5 million people. It will be the hub for one of the 10 biggest urban economies in the world. Plus, it will be a livable, human-centric city with green spaces, recreational facilities and an urban lifestyle to attract talent from around the world to the biggest city in the Middle East.

“True growth begins in the city, whether in terms of industry, innovation, education, services, or other sectors. I have no doubt that the world economies are not based on nations, but on cities,” the Crown Prince said at the event, organized under the theme “The Neo-Renaissance.”

The plans for a Riyadh renaissance are to be implemented by Fahd Al-Rasheed, the president of the Royal Commission for Riyadh City (RCRC), who is well aware of the challenges presented by the ambitious strategy. “Vision without execution is hallucination,” he said.

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A detailed road map for the transformation of the city is currently being prepared, likely to be unveiled in the second quarter of the year. It will have to add gritty detail and — hopefully — solutions to the economic, social, demographic and financial challenges the plan involves.

But experts in urban development strategy in the Middle East have told Arab News that, far from being an over-ambitious daydream, the strategy is practical, achievable and ultimately beneficial.

Karl Sharro, London-based architect and editor of the forthcoming book “The New Arab City,” said: “Historically, it is totally plausible. Riyadh is so important for the history of the country.”




A Riyadh street in 1937. The city has a long history of rapid growth. (AFP/File)

Todd Reisz, also an architect based in Amsterdam whose new work “Showpiece City: How Architecture Made Dubai,” has just been published, said Riyadh already has “a very substantial capacity to plan a city and organize its components.”

Jeff Merritt, a San Francisco-based expert in smart cities and urban transformation for the World Economic Forum, said: “Such rapid urban expansion is not implausible, but you have to learn from the experience of other world cities.”

The urban experts agreed that, while Riyadh’s plans were ambitious, they were not unprecedented. In fact, the Saudi capital itself has a long history of such rapid growth.

Writing in the journal Scientific Research, architecture expert Saleh Al-Hathloul said: “Riyadh had grown from a small town of less than half a million inhabitants into a large metropolis of 7 million during the past 50 years. The speed and scale of its transformation have had few parallels.”

Between the 1930s and the 1980s, Riyadh roughly doubled in size each decade. As the center of administration for the new Kingdom of Saudi Arabia, it attracted ministerial and other government buildings, as well as a diplomatic quarter and a central business district with all the financial and commercial apparatus of a capital city.




Passengers ready to board a train from Riyadh to Dhahran in 1955. (Three Lions/Getty Images)

In the 1970s, the booming city needed the skills of a master-planner, and the authorities called in Constantinos Doxiadis, an architect and urban planner who had worked on many projects in his native Greece, as well as in the Middle East and Pakistan, where he designed the new capital, Islamabad.

With Riyadh in the midst of oil-fueled economic and demographic growth, Doxiadis experimented with the idea of a US-style grid system, still in evidence in the Al-Olaya district of the city today.

By the 1990s, Riyadh’s development was taken over by the Ar Riyadh Development Authority (now a unit of the RCRC), which launched MEDSTAR — the Metropolitan Development Strategy for Ar Riyadh — seeking to bring structure to the city’s rapid expansion.

It aimed to create urban subcenters (one of which is the basis for the King Abdullah Financial District), new suburban developments, and the public transportation system being built around the Metro.

“Saudi Arabia and Riyadh have a history of urban planning,” Reisz said, pointing also to the development work at Jubail and Yanbu and newer economic and industrial hubs as examples of this tradition.




Construction underway in the capital in 1980. (François LOCHON/Gamma-Rapho via Getty Images)

Saudi Arabia also has the lessons of other cities around the world that have experienced such phenomenal expansion. In the Middle East, there is the model of Dubai, which achieved the Riyadh goal of doubling population in a decade more than once in its 50-year history as part of the UAE.

Reisz highlights the central role of architecture in Dubai growth: “Modern architecture made Dubai in the physical sense, but it also delivered an image easily conveyed and broadcast,” he wrote.

From further afield, the example of the dramatic demographic growth in China will also be in the Riyadh planners’ case-study folder. Several Chinese cities have grown from provincial towns to become megacities in the past few decades, matching the country’s rise as an economic superpower.

Chongqing, in the center of China, has become an urban giant of more than 30 million people in the space of a few decades, remarkable even for a country where 10-million-plus cities seem to spring up almost overnight.

“For Saudi Arabia, China is a nice parallel, because urban growth there has been driven by centralized government policy,” said Sharro.




An image of Riyadh from last year. By 2030, the city will at least double in size from its current population of around 7.5 million. (Reuters/File)

Merritt, however, urged some caution in applying the China model to Saudi Arabia. “In China, the growth was driven by the migration of a large rural population into cities. Saudi Arabia does not have such a large rural pool,” he said.

As Crown Prince Mohammed bin Salman highlighted at the FII conference, the driving force for the Riyadh expansion will be economic. Riyadh represents about 50 per cent of the non-oil economy in Saudi Arabia, and enjoys cost advantages over other urban centers.

The cost of creating jobs in the city are 30 percent less than other cities of Saudi Arabia. Reisz endorsed that rationale. “Cities are tools to reach economic goals. Cities build economies. Their development requires integration between economics, finance and urbanism,” he said.

The Riyadh plan relies heavily on the city’s ability to draw business in to take advantage of the size and growth of the Kingdom’s economy. The RCRC and the Saudi investment ministry have collaborated on a program to persuade big multinational companies to set up their regional headquarters in the city, and were able to unveil 25 such new corporate entrants last month.

Attracting more new HQs in the city will depend to a large degree on the incentives currently being finalized as part of a wide-ranging reform of corporate and financial law to further improve the Kingdom’s standing in the global competitiveness league tables.




Fahd Al-Rasheed, the president of the Royal Commission for Riyadh City. (SPA)

Private investment in the Riyadh project is a key factor. Al-Rasheed said that most of the first-stage capital would come from government investment, though it is clear that later multi-billion-dollar stages would expect a bigger contribution from private sources keen to get on the ground-floor level of the development.

The great cities of the world are human environments as well as economic centers, and the “neo-renaissance” strategy lays great emphasis on the “livability” factor.  The Crown Prince painted a picture of a green city with big public open spaces, where millions of trees would be planted to protect the environment and make urban life in a desert environment more comfortable.

The greening of Riyadh will also be accompanied by a boom in entertainment, cultural and leisure activities as part of the liberalization of the Kingdom’s social environment under the Vision 2030 strategy.




A detailed road map for the transformation of Riyadh is currently being prepared. (Shutterstock)

“For example, as more women feel free to go out alone or with their friends, that will change the social fabric of the city,” Sharro said, highlighting a factor that is likely to be reflected in the new urban design and architecture of the growing city.

“Riyadh now is a car-dominated city, but will they take the opportunity to move to a more European style, to densify? There is potential to grow population numbers without expanding outwards in an urban sprawl by having more apartment buildings and more social facilities available locally,” he added.

Merritt pointed to the ambition of Paris to become a “15-minute city” where most social, cultural and commercial amenities are reachable on foot, a concept that also has an echo in The Line, the central urban strip of the NEOM development. “You don’t want a city devoid of humanity dominated by cookie-cutter buildings,” he said.

The planners at the RCRC have other priorities too as they prepare to unveil detailed plans for the renaissance of the city: The provision of utilities and energy in a sustainable way, the expansion of Riyadh’s digital capability and, by no means the least, the formal opening and ultimate expansion of the metro system.

Much will depend too on the ability to generate jobs in the city to meet the aspirations of the growing, and increasingly youthful, population.

But the urban experts seem genuinely excited by the prospects for the Riyadh renaissance, as Sharro, the London-based architect, explained. “I would have to have a crystal ball to see how it will all work out, but if I was a young Saudi man or woman, I’d be delighted to be part of it,” he said.

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• Twitter: @frankkanedubai

Note: An earlier version of the story had wrongly attributed the last quote to Todd Reisz instead of Karl Sharro.


Saudi PIF on track to reach $2tn in AuM, 2nd-largest globally by 2030

Updated 10 January 2025
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Saudi PIF on track to reach $2tn in AuM, 2nd-largest globally by 2030

RIYADH: Saudi Arabia’s Public Investment Fund is set to be ranked second among the world’s sovereign wealth bodies by 2030 with $2 trillion in assets under management, according to monitoring organization Global SWF.

A report from the firm forecasts PIF will more than double its current AuM value of $925 billion by the end of the decade, and rise from its 2024 ranking of sixth among global state-owned investor funds.

According to projections from the institute, PIF’s AuM in 2030 will represent 10.5 percent of the global sovereign wealth funds’ total assets, which are set to reach $19 trillion, as it rises from sixth place

Diego Lopez, founder and managing director at Global SWF, said: “Capital attracts capital — so international financial institutions are attracted in partnering with a player with such a huge balance sheet and role in the economic development.”

According to the report, to achieve its ambitious goal of reaching $2 trillion by 2030, the PIF will depend on a combination of strategies. These include oil revenue allocations, which refer to the portion of the Kingdom’s oil earnings transferred to the PIF, debt issuance, and returns generated from its investments.

“Saudi Arabia needs to make its capital base sustainable, diversified and resilient to lower levels of oil prices,” Lopez told Arab News.

“That means raising debt, as PIF has been doing, and eventually raising equity through subsidiaries that can act as asset managers — we see this working very well in Abu Dhabi with Mubadala Capital, Lunate, etc,” he added.

According to the report, the PIF’s 10-year annualized return from 2013 to 2022 stood at 6.9 percent, outperforming the sovereign wealth fund average of 5.7 percent annually.

In 2024, the global economy showed resilience despite geopolitical risks and market uncertainties, with global GDP growth projected at 3.2 percent, slightly improving to 3.3 percent in 2025, according to the OECD.

The International Monetary Fund forecasts a subdued five-year outlook of 3.1 percent, reflecting weaker growth in China, Latin America, and the EU. Developed markets are facing slower growth due to tightening monetary policies, while developing economies maintain greater stability.

Central banks, led by the US Federal Reserve, began easing rates in 2024, responding to reduced inflationary pressures. According to the report, as the global economy adapts, sovereign wealth funds are increasingly focused on capital preservation and stimulating foreign direct investment, with those in the Middle East and North Africa region entering a new phase of growth.

Saudi Arabia offers robust economic expansion fueled by diversification initiatives and ambitious mega-projects like NEOM, the Red Sea Project, and Qiddiya.  

PIF’s investments are strategically positioned to capitalize on these high-growth areas, making it a gateway for investors seeking exposure to dynamic emerging market opportunities.

GCC sees greater international attention

According to the report, global sovereign wealth funds have, for the first time, surpassed $13 trillion in assets under management, with capital heavily concentrated in two key regions — the Gulf Cooperation Council, holding 38 percent of the total, and Southeast Asia at 10 percent.

Interest in these powerful global investors remains strong, the report said, drawing heightened international attention to the GCC, a region with fewer than 60 million residents.

Previously named the “Region of the Year” by Global SWF, the GCC has seen a wave of global asset managers and bankers establishing local offices to capitalize on burgeoning opportunities. According to the report, the GCC-Southeast Asia axis is expected to continue driving growth across the sovereign wealth landscape.

PIF represented 7.11 percent of MENA’s sovereign wealth funds’ AuM, with assets totaling $925 billion. 

Leading the rankings is Abu Dhabi Investment Authority at $1.11 trillion, followed by Kuwait Investment Authority with $969 billion.

Global sovereign wealth fund investments totaled $136.1 billion across 358 transactions in 2024. The “Oil Five” — ADIA, ADQ, PIF, QIA, and Mubadala — maintained their dominance, together accounting for 60 percent of the total investment value, amounting to $82 billion. As a result, they secured positions among the top 19 dealmakers of the year.

This marks a significant rise from $74 billion in both 2023 and 2022, $41 billion in 2021, $39 billion in 2020, and $28 billion in 2019, reflecting the accelerating investment momentum of these sovereign wealth giants.

While some Gulf sovereign wealth funds leaned toward emerging markets, including their domestic economies, developed markets remained the dominant choice for most global sovereign investors.

Saudi Arabia’s PIF, Abu Dhabi’s ADQ, and Qatar’s QIA exhibited a preference for emerging markets, reflecting their strategic focus on regional and high-growth economies.

PIF investments

According to the report, a significant factor driving the PIF’s growth is its projected boost in domestic spending to $70 billion annually by 2025.

The fund’s investment strategy is focused on high-growth sectors, including infrastructure, digitalization, AI, and renewable energy.

Among the top 15 largest global investments by sovereign wealth funds in 2024 was PIF’s $3 billion acquisition of a 51 percent stake in Saudi Arabia’s TAWAL and $2.16 billion of a 40 percent stake in Selfridges in the UK.

Other significant investments for the PIF include a 15 percent stake in Heathrow Airport for $1.8 billion.

According to the institute, the largest deals are consistently pursued by a select group of funds known for their substantial firepower and risk appetite. This group includes the top 10 spenders, with the GCC’s “Big 5” leading the way.

Mubadala emerged as the leading sovereign investor in 2024, deploying $29.2 billion across 52 deals, a 67 percent increase from the previous year. It was followed by GIC at $26.6 billion, CPP with $21.1 billion, PIF at $19.9 billion, and ADIA at $17.1 billion.

PIF has also ventured into artificial intelligence and space, co-investing in Databricks and launching Neo Space Group to advance Saudi Arabia’s satellite industry.

These initiatives reflect the fund’s commitment to positioning Saudi Arabia as a leader in global digital and technological innovation.

PIF saw a 24 percent decline in its US equity portfolio, the report said. At the beginning of 2024, the fund sold shares in 18 companies worth nearly $13 billion, including pandemic-era investments like gaming giant Activision Blizzard, cruise leader Carnival, and entertainment company Live Nation, which yielded strong returns.

According to Lopez: “The sale of the listed equities was about monetizing a huge upside from their purchase during covid, rather than about decreasing the overseas portfolio.”

The expert noted the importance to recognize that while PIF’s domestic portfolio may be growing relative to its international holdings, the overall assets under management continue to expand, with significant investments being made outside the Kingdom.

PIF has also made significant investments in the electric vehicle sector, despite facing challenges with earlier ventures.

In 2019, PIF divested from Tesla but doubled down on Lucid Motors, placing a major bet on the EV manufacturer.

This strategic move has required substantial funding, including $2.8 billion in 2024 alone. Despite the financial commitment, PIF remains focused on its long-term vision for Saudi Arabia, supporting Lucid’s growth with a manufacturing facility in King Abdullah Economic City.

In January, Lucid Motors became the first global automotive company to join the Kingdom’s “Made in Saudi” program, reinforcing the country’s push to strengthen its industrial capabilities.

The program also supports Vision 2030’s goals of attracting investments, boosting non-oil exports, and creating sustainable jobs, while positioning Saudi Arabia as a hub for innovation and manufacturing in the EV sector.

PIF’s debt financing

On Jan. 6, PIF announced the completion of its inaugural $7 billion murabaha credit facility, supported by a syndicate of 20 international and regional financial institutions.

This Shariah-compliant financing structure is part of the fund’s medium-term capital raising strategy, aimed at diversifying its funding sources to support transformative investments both globally and within Saudi Arabia.

According to another report published by Global SWF in January, PIF’s use of debt financing mirrors a growing trend among sovereign wealth funds and public pension funds, which have raised around $700 billion over the past two decades.

Despite strong credit ratings from Moody’s and Fitch, PIF faces pressure from surging domestic investment in giga-projects like NEOM and Qiddiya, with annual funding needs expected to rise from $40 billion in 2023 to $70 billion by 2025.

Sustaining investor confidence will depend on its ability to manage financial obligations and execute Vision 2030 goals.

While markets currently support PIF’s sovereign-backed debt, delays or disruptions could strain resources and affect its ambitious agenda, making its financing strategy critical for both national economic transformation and global sovereign investment trends.

However, PIF’s diversified funding strategy, coupled with its ability to attract global partnerships, positions it as a transformative force capable of reshaping Saudi Arabia’s economic future and reinforcing its role as a leading driver of global investment innovation.


Oil Updates — crude jumps on concerns about more sanctions on Russia and Iran

Updated 10 January 2025
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Oil Updates — crude jumps on concerns about more sanctions on Russia and Iran

LONDON: Oil prices surged on Friday and were on track for a third straight week of gains as traders focused on potential supply disruptions from more sanctions on Russia and Iran.

Brent crude futures gained $2.50, or 3.3 percent, to $79.42 a barrel by 3:48 p.m. Saudi time, reaching their highest in more than three months. US West Texas Intermediate crude futures advanced $2.39, or 3.2 percent, to $76.31.

“There are several drivers today. Longer term, the market is focused on the prospect for additional sanctions,” said Ole Hansen, head of commodity strategy at Saxo Bank. “Short term, the weather is very cold across the US, driving up demand for fuels.”

Ahead of US President-elect Donald Trump’s inauguration on Jan. 20, expectations are mounting over potential supply disruptions from tighter sanctions against Iran and Russia while oil stockpiles remain low.

This could materialize even earlier, with US President Joe Biden expected to announce new sanctions targeting Russia’s economy before Trump takes office. A key target of sanctions so far has been Russia’s oil industry.

The US weather bureau expects central and eastern parts of the country to experience below-average temperatures. Many regions in Europe have also been hit by extreme cold and are likely to continue to experience a colder than usual start to the year, which JPMorgan analysts expect to boost demand.

“We anticipate a significant year-over-year increase in global oil demand of 1.6 million barrels a day in the first quarter of 2025, primarily boosted by ... demand for heating oil, kerosene and LPG,” they said in a note on Friday.

Meanwhile, the premium on the front-month Brent contract over the six-month contract reached its widest since August this week, potentially indicating supply tightness at a time of rising demand.

Inflation worries are also delivering a boost to crude oil prices, said Saxo Bank’s Hansen. Investors are growing concerned about Trump’s planned tariffs, which could drive inflation higher. A popular trade to hedge against rising consumer prices is through buying oil futures.

Oil prices have rallied despite the US dollar strengthening for six straight weeks, making crude oil more expensive outside the US.


SABIC, Almarai, SEC able to absorb fuel price hike: S&P Global

Updated 09 January 2025
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SABIC, Almarai, SEC able to absorb fuel price hike: S&P Global

RIYADH: Major Saudi companies, including chemical company SABIC, dairy firm Almarai, and Saudi Electric Co., are well-positioned to handle the impact of higher fuel and feedstock prices introduced on Jan. 1, according to a new report.

Released by capital market economy firm S&P Global, the analysis reveals that those corporates will be able to absorb the marginal increase in production costs by further improving operational efficiencies as well as potentially via pass-through mechanisms.

This came after Saudi Aramco increased diesel prices in the Kingdom to SR1.66 ($0.44) per liter, effective Jan. 1, marking a 44.3 percent rise compared to the start of 2024. The company has kept gasoline prices unchanged, with Gasoline 91 priced at SR2.18 per liter and Gasoline 93 at SR2.33 per liter.

Despite the hike, diesel prices in Saudi Arabia remain lower than those in many neighboring Arab countries. In the UAE and Qatar, a liter of diesel is priced at $0.73 and $0.56, respectively, while in Bahrain and Kuwait, it costs $0.42 and $0.39 per liter.

“For SABIC and Almarai, the increase in feedstock prices will not affect profitability significantly. In the case of utility company, SEC, additional support will likely come from the government if needed,” the report said.

The capital market economy firm projects that SABIC will continue to outperform global peers on profitability.

“We don’t expect the rise in feedstock and fuel prices to materially affect profitability, since the company estimates it will increase its cost of sales by only 0.2 percent,” the report said.

It further highlighted that SABIC is considered a government-related entity with a high possibility of receiving support when needed.

The report also underlines that Almarai anticipates an additional SR200 million in costs for 2025, driven by higher fuel prices and the indirect effects of increased expenses across other areas of its supply chain.

“We believe Almarai will continue focusing on business efficiency, cost optimization, and other initiatives to mitigate these impacts,” the release stressed.

With regards to SEC, S&P said that an unrestricted and uncapped balancing account provides a mechanism for government support, including related to the higher fuel costs.

“We believe any increased fuel cost will be covered by this balancing account,” the report said.

The study further highlights that the marginal increase “could significantly affect wider Saudi corporations’ profit margins and competitiveness.”

The S&P data also suggests that additional costs will be reflected in companies’ financials from the first quarter of 2025.

“Saudi Arabia is continuing its significant and rapid transformation under the country’s Vision 2030 program. We expect an acceleration of investments to diversify the Saudi economy away from its reliance on the upstream hydrocarbon sector,” the report said.

“The sheer scale of projects — estimated at more than $1 trillion in total — suggests large funding requirements. Higher feedstock and fuel prices would help reduce subsidy costs for the government, with those savings potentially redeployed to Vision 2030 projects,” it added.


Lenovo to produce ‘Saudi Made’ PCs by 2026 following $2bn Alat deal closure

Updated 09 January 2025
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Lenovo to produce ‘Saudi Made’ PCs by 2026 following $2bn Alat deal closure

RIYADH: Chinese tech giant Lenovo is set to manufacture millions of computer devices in Saudi Arabia by 2026, following the completion of a $2 billion investment deal with Alat, a subsidiary of the Public Investment Fund. 

First announced in May, the partnership has now received shareholder and regulatory approvals, paving the way for Lenovo to establish a regional headquarters and a manufacturing facility in the Kingdom. 

The deal marks a significant step in aligning Lenovo’s growth ambitions with Saudi Arabia’s Vision 2030 goals of economic diversification, innovation, and job creation, the company said in a press release. 

The factory will manufacture millions of PCs and servers every year using local research and development teams for fully end-to-end “Saudi Made” products and is expected to begin production by 2026, it added. 

“Through this powerful strategic collaboration and investment, Lenovo will have significant resources and financial flexibility to further accelerate our transformation and grow our business by capitalizing on the incredible growth momentum in KSA and the wider MEA region,” Yang said. 

He added: “We are excited to have Alat as our long-term strategic partner and are confident that our world-class supply chain, technology, and manufacturing capabilities will benefit KSA as it drives its Vision 2030 goals of economic diversification, industrial development, innovation, and job creation.” 

Amit Midha, CEO of Alat, underscored the significance of the partnership for both Lenovo and the Kingdom. 

“We are incredibly proud to become a strategic investor in Lenovo and partner with them on their continued journey as a leading global technology company,” said Midha. 

“With the establishment of a regional headquarters in Riyadh and a world-class manufacturing hub, powered by clean energy, in the Kingdom of Saudi Arabia, we expect the Lenovo team to further their potential across the MEA region,” he added. 

The partnership is expected to generate thousands of jobs, strengthen the region’s technological infrastructure, and attract further investment into the Middle East and Africa, according to the press release. 

In May, Lenovo raised $1.15 billion through the issuance of warrants to support its future growth plans. The initiative, which was fully subscribed by investors, signals confidence in Lenovo’s strategic approach and its plans for global expansion. 

The investment deal was advised by Citi and Cleary Gottlieb Steen & Hamilton for Lenovo, while Morgan Stanley and Latham & Watkins represented Alat. 


Lebanon’s bonds climb as parliament elects first president since 2022

Updated 09 January 2025
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Lebanon’s bonds climb as parliament elects first president since 2022

LONDON: Lebanon’s government bonds extended a three-month long rally on Thursday as its parliament voted in a new head of state for the crisis-ravaged country for the first time since 2022.

Lebanese lawmakers elected army chief Joseph Aoun as president. It came after the failure of 12 previous attempts to pick a president and the move boosts hopes that Lebanon might finally be able to start addressing its dire economic woes.

Lebanon’s battered bonds have almost trebled in value since September when the regional conflict with Israel weakened Lebanese armed group Hezbollah, long viewed as an obstacle to overcoming the country’s political paralysis.

Most of Lebanon’s international bonds, which have been in default since 2020, rallied after Aoun’s victory was announced to stand between 0.8 and 0.9 cents higher on the day and at nearly 16 cents on the dollar.

They have also risen almost every day since late December, although they remain some of the lowest priced government bonds in the world, reflecting the scale of Lebanon’s difficulties.

With its economy still reeling from a devastating financial collapse in 2019, Lebanon is in dire need of international support to rebuild from the war, which the World Bank estimates to have cost the country $8.5 billion.