Saudi Arabia raises undeveloped land tax to 10%, expands scope to vacant properties
Updated 30 April 2025
MOHAMMED AL-KINANI
JEDDAH: Saudi Arabia has raised the annual fee on undeveloped land from 2.5 percent to up to 10 percent of property value, as part of Cabinet-approved reforms to address market imbalances.
The amendments to the White Land Tax Law expand its scope for the first time to include levies on long-vacant buildings and revised land-size thresholds for taxation.
The changes, ratified by the Cabinet on April 29, mark the most significant overhaul of the law since its inception in 2016.
They come as part of a broader effort to accelerate development, counter speculation, and address supply-demand imbalances in the Kingdom’s real estate sector, which has seen mounting pressure in key cities such as Riyadh.
The reforms support broader efforts to curb speculation, boost land utilization, and enhance access to affordable housing in line with Vision 2030.
In a post on his official X account, Minister of Municipal, Rural Affairs and Housing Majid Al-Hogail said: “The amendments included stimulating the use of vacant properties, and amending the targeted areas and the amount of the fee on undeveloped and developed vacant lands within the urban area, by up to 10 percent.”
The revised framework sets a minimum land area of 5,000 sq. meters for the application of the fee, covering both individual plots and contiguous holdings in designated urban areas.
It also broadens the tax base to include vacant buildings — defined as ready-to-use buildings prepared for occupancy within the urban area that have not been used for a long period without acceptable justification, and whose lack of use or exploitation affects the availability of sufficient supply in the real estate market.
These vacant properties will now face an annual levy of up to 5 percent of their estimated rental value, as specified in forthcoming regulations.
The updated law introduces clearer criteria, phased implementation, and enhanced enforcement mechanisms, including grievance channels and unified property databases.
The Kingdom originally launched the White Land Tax Law to discourage land hoarding and promote more equitable development.
According to the Saudi Press Agency, Al-Hogail stated that the revised system is expected to enhance the efficient use of idle land and buildings, align supply with demand, and promote the productive use of real estate assets. It also seeks to encourage the development of undeveloped land and increase the overall availability of real estate, particularly residential properties.
Speaking to Al-Ekhbariya, Saif Al-Suwailem, spokesperson for the Ministry of Housing, said that the executive regulations for vacant property fees will outline the implementation mechanism.
The official added: “The amendments to the White Land Tax will enhance land use efficiency and stimulate the development of residential projects,” Al-Ekhbariya reported.
Moreover, he emphasized that amending the fees will have a clear and effective impact on enhancing supply and achieving real estate balance, noting that the system was completed in half the time.
The changes come as Saudi authorities intensify efforts to stabilize the housing market in cities like Riyadh, where surging land values and rental rates have strained affordability.
A study by the Royal Commission for Riyadh City and the Council of Economic and Development Affairs recently prompted a series of measures, including lifting development restrictions in large swaths of northern Riyadh.
The government will issue executive regulations for the amended White Land Tax Law within 90 days of its publication in the official gazette. Regulations governing vacant property taxation are expected within one year, according to SPA.
Formula 1 turbocharges Saudi economic diversification drive
KSA is deepening its investment in the sport as part of its strategy to stimulate economic activity
Updated 7 sec ago
MOHAMMED AL-KINANI
JEDDAH: Saudi Arabia is accelerating its push to diversify its economy by turning to major international events such as Formula 1, as the Kingdom uses global motorsports to support its non-oil goals.
Since hosting its first Grand Prix in 2021, the Kingdom has funneled more than $6 billion into its sports industry, part of a broader plan to boost tourism, create jobs, and raise non-oil activities to 52 percent of gross domestic product — a 20 percent jump since the launch of Vision 2030.
With plans underway to move the race to Qiddiya City between 2027 and 2029, the Kingdom is deepening its investment in the sport as part of a broader strategy to stimulate economic activity and position itself as a global hub for elite sports and entertainment.
High-profile events such as the Formula 1 Grand Prix in Jeddah exemplify how international sporting platforms are being used to stimulate tourism and highlight the Kingdom’s economic transformation.
Tamer Al-Sayed, chief financial officer at the Future Investment Initiative Institute, told Arab News that Formula 1 was never just about cars on a track. “It was a high-velocity statement. A signal to the world that Saudi Arabia is playing a new game — and playing to win,” he said.
Formula 1 has experienced a significant rise in popularity, with its global fan base reaching 826.5 million and viewership climbing to 1.6 billion in 2024, according to a recent report by PwC titled “Saudi Arabia’s motorsport ambition – Technology, investment and the future of racing.”
The global consultancy firm’s report noted that beyond Formula 1, motorsports are expanding into electric racing and other formats such as sports car and off-road competitions, driven by technological innovation and a worldwide push for sustainability.
Global popularity surged after Liberty Media’s 2017 acquisition of Formula 1 and the 2019 Drive to Survive series, which drew younger, more diverse audiences — doubling US viewership on ESPN and boosting sponsorship revenue to $632 million in 2024, according to PwC.
Economic impact
Flagship international events in Saudi Arabia, like the Formula 1 Grand Prix, are playing a pivotal role in driving tourism, stimulating local commerce, and showcasing the Kingdom’s growing appeal as a global destination.
According to PwC’s report, Saudi Arabia’s strategic investments in motorsports are positioning the Kingdom as a key player in the industry’s future.
The report said Saudi Arabia is aggressively cementing its role in motorsports’ future.
“The Kingdom has committed over $6 billion to its sports industry since 2021, fueling the development of world-class venues like the Jeddah Corniche Circuit and the upcoming Qiddiya Speed Park,” it added.
This global expansion reflects the sport’s soaring popularity, especially among younger audiences and emerging markets. Saudi Arabia has managed to secure a long-term position in that landscape.
Yaseen Ghulam, associate professor of economics and director of research at Al-Yamamah University
However, the report emphasized that the success of a modern motorsport circuit relies not only on financial investment but also on innovation in fan engagement, race operations, and digital broadcasting to ensure long-term success.
With the Kingdom and the wider region increasing their investment in motorsports, new opportunities for economic growth and innovation are unfolding.
“As Saudi Arabia and the broader MENA region invest in motorsports and advanced racing technologies, the opportunity to commercialize and expand these innovations into other industries grows exponentially,” the PwC’s report said.
Al-Sayed noted that the economic ripple effects of events like Formula 1 have moved beyond anecdotal observations and are now supported by measurable data.
“In pure numbers: Since the first Saudi Grand Prix in 2021, tourism linked to the event has driven six-figure visitor volumes annually. Hotels hit peak occupancy. Flights sell out. Local businesses — from luxury brands to food trucks — ride that wave. These aren’t soft indicators; they’re measurable economic inputs,” he added.
More importantly, Al-Sayed said, this is not a one-off surge but rather a case study in how a flagship event can anchor a broader sector.
“Entertainment and tourism — both once peripheral — are now pushing serious weight in the non-oil GDP mix. You can see the reflection in the Ministry of Tourism’s own targets: 150 million annual visitors by 2030, with sports and cultural events as core levers,” he added.
As for the event’s impact on employment, the chief officer said that it extends beyond temporary jobs, highlighting the emergence of an entire ecosystem encompassing event production, hospitality, and logistics, as well as digital media, security, and sponsorship management.
“Each Grand Prix fuels demand across this chain, and each year the local capability strengthens. So yes, F1 was expensive. But so was missing out on the future,” he said.
Al-Sayed expressed confidence that in a decade, the question will not be why Saudi Arabia invested heavily in sports and entertainment, but rather how it anticipated the trend ahead of the rest of the world.
Yaseen Ghulam, associate professor of economics and director of research at Al-Yamamah University in Riyadh, said that Formula 1 is more than just a sport — it serves as a global platform for economic influence and visibility.
“The Las Vegas Grand Prix generated over $1.2 billion in economic activity, with racegoers spending nearly three times more than average tourists,” he said, noting that similar benefits are beginning to emerge in Saudi Arabia.
He also mentioned that hotel prices in Jeddah during the 2021 Formula 1 race exceeded $450 per night, reflecting high demand and a significant impact on the local tourism and hospitality sectors.
“This global expansion reflects the sport’s soaring popularity, especially among younger audiences and emerging markets. Saudi Arabia has managed to secure a long-term position in that landscape,” Ghulam added.
The associate professor went on to say that global sports events, such as Formula 1 or the Olympics, bring pride, increased productivity, and deliver higher well-being to nations through buzz, branding, and business potential.
“However, economic analysis of the costs and benefits, as well as financial risks, of hosting F1 is often overlooked. Saudi Arabia has been hosting F1 events exceptionally well since 2021,” he said.
From Jeddah to Qiddiya
The Qiddiya megaproject in Riyadh, announced in March 2024, will feature one of the world’s most innovative motorsport tracks, with the configurable Speed Park Track located at the heart of Qiddiya City, positioning the Kingdom as a global racing destination.
Al-Sayed called Jeddah the proof of concept and Qiddiya the blueprint for Saudi Arabia’s motorsports strategy.
He elaborated further on the success of the Jeddah circuit, noting: “When we launched the Jeddah circuit, the global motorsports community raised its eyebrows — and then had to admit it delivered. The fastest street circuit in F1, with a breathtaking Red Sea backdrop, timed perfectly with the Kingdom’s rising international profile.”
Al-Sayed called Qiddiya a masterstroke — a vision beyond a venue — designed to place Formula 1 at its core while driving growth in infrastructure, real estate, tourism, and creative industries.
“It is one of those projects where the economic spillover is the point,” he said.
Echoing Al-Sayed’s remarks, Ghulam noted that when Qiddiya hosts its first Saudi Grand Prix — possibly in 2029 — it will undoubtedly make waves, following the strong precedent set by Jeddah.
“It would not be surprising if Saudi Arabia opted to hold two races in the near future in accordance with Saudi Vision 2030, since F1 now hosts three races in the US – Miami, Austin, and Vegas,” Ghulam concluded.
Why tech startups should choose Riyadh as their MENA launchpad
Saudi Arabia offers startups access to a high-spending consumer base and a gateway to regional expansion
Updated 11 min 57 sec ago
Miguel Hadchity
RIYADH: Riyadh is becoming a leading destination for tech startups in the Middle East, fueled by Saudi Arabia’s Vision 2030 reforms, an advanced infrastructure, and robust government-backed incentives.
The Saudi information and communication technology market is projected to reach $54.90 billion in 2025 and $82.51 billion by 2030 at a compound annual growth rate of 8.49 percent, according to an analysis by Mordor Intelligence.
This growth highlights the Kingdom’s increasing prominence as a regional innovation hub.
At the heart of this transformation is Saudi Arabia’s Vision 2030 economic diversification plan, which has placed technology at the forefront of its strategy. Major initiatives, such as NEOM, a $500-billion smart city powered by artificial intelligence and renewable energy, and Riyadh Tech Valley, a dedicated hub for AI, the Internet of Things, and robotics startups, are driving this momentum.
Government programs such as the Saudi Unicorns Program and Tech Growth Financing provide critical support for scaling businesses, further cementing Riyadh’s appeal.
Emmanuel Durou, technology, media and telecommunications leader at Deloitte Middle East, highlighted three key operational factors behind Riyadh’s startup success. “First, Saudi Arabia’s advanced digital infrastructure has significantly accelerated startup growth,” he told Arab News in an interview.
The 2018 Bankruptcy Law emphasizes debt restructuring over liquidation, providing cash-strapped startups a mechanism to negotiate with creditors early before default.
Jasem Al-Anizy, partner in corporate finance at Addleshaw Goddard KSA
Government-led digital transformation initiatives have created a robust technological backbone, with 14 percent of Saudi broadband users enjoying speeds over 1G bits per second — far surpassing the 4 percent seen in markets like the UK. “This infrastructure supports rapid innovation and scaling up,” he added.
The second factor, according to Durou, is the Kingdom’s strategic focus on developing local talent pipelines. “As many as 86 percent of Saudi universities now provide undergraduate programs in AI, 56 percent offer master’s degrees, and doctoral opportunities stand at 9 percent,” he noted.
The Deloitte leader emphasized that institutions like King Abdullah University of Science and Technology play a pivotal role in supplying startups with skilled, technology-ready talent.
Lastly, Durou pointed to the Kingdom’s supportive business environment, which includes government incentives, substantial funding mechanisms like venture capital and private equity, and vibrant incubator ecosystems such as Garage 46 and Impact 43.
He also shed light on the Kingdom’s high consumer adoption rates of advanced technologies, particularly Gen AI.
Deloitte’s recent survey outlined Saudi Arabia’s high awareness of the technology at 76 percent, with usage frequencies of 20 percent daily and 32 percent weekly — significantly higher than the UK, he added.
When comparing Riyadh’s startup scaling environment to Dubai’s, Durou observed distinct strengths in each.
“In Riyadh, government-driven initiatives such as Saudi Vision 2030 have significantly streamlined regulatory processes, enabling startups to reduce their time-to-market,” he said, adding that “extensive support from local incubators, accelerators, and dedicated funding programs serve to further accelerate product development and launch timelines.”
Durou noted that customer acquisition costs in Riyadh are comparatively lower, driven by the ongoing surge in digital adoption among consumers and supported by targeted government-backed marketing initiatives.
The fintech sector, in particular, benefits from robust governmental support, which helps meet rising local demand. Meanwhile, e-commerce growth is further propelled by high Internet penetration and shifts in consumer behavior.
“Dubai offers rapid market entry facilitated by the globally recognized Dubai International Financial Centre and a mature, efficient regulatory environment. Although high market competition can drive up customer acquisition costs in Dubai, it’s balanced by an expansive and diverse customer base,” he explained.
Durou highlighted that the DIFC ecosystem offers fintech startups access to government incentives, which greatly enhance their growth prospects. He also emphasized that Dubai’s strategic geographic position as a global trade hub, along with its advanced logistics and warehousing capabilities, significantly accelerates the expansion of e-commerce.
Jasem Al-Anizy, partner in corporate finance at Addleshaw Goddard KSA, shed light on the legal structures that are proving effective in the Kingdom.
“Saudi startups have historically preferred an offshore ring-fencing of intellectual property assets by holding and protecting intellectual property interests in a standalone sister company based in an offshore jurisdiction,” he explained to Arab News.
“This has helped startups in scaling globally and simplifies exit strategies,” Al-Anizy said.
Government-driven initiatives have significantly streamlined regulatory processes, enabling startups to reduce their time-to-market.
Emmanuel Durou, technology, media and telecommunications leader at Deloitte Middle East
However, with stronger business and intellectual property laws, there is increasing trust in local company structures like the Simplified Closed Joint Stock Co.
Al-Anizy also highlighted the advantages of Riyadh’s bankruptcy laws for tech startups facing liquidity challenges. The 2018 Bankruptcy Law emphasizes debt restructuring over liquidation, providing cash-strapped startups a mechanism to negotiate with creditors early before default, he said.
The law was introduced to provide guidance on the adoption and implementation of bankruptcy proceedings. Despite its name, the primary objective of the Bankruptcy Law is not liquidation but rather the rescue of insolvent businesses through reorganization and financial restructuring.
Al-Anizy said that this sophisticated regime demonstrated in recent large-scale restructurings, has garnered recognition from founders and investors alike. On the dispute side, mediation and the Saudi Center for Commercial Arbitration are becoming preferred avenues for resolution.
For foreign founders setting up their MENA Headquarters in Riyadh, Al-Anizy stressed the importance of clear contractual considerations. “Founders having an unclear picture of their share cap table, equity vesting, or the conversion of any issued SAFE/KISS notes is an easily avoidable way to lose investor confidence,” he warned.
A Simple Agreement for Future Equity is an investment instrument that allows startups to raise capital without immediately determining a valuation, converting it into equity upon a future-priced round or liquidity event. Similarly, a Keep It Simple Security operates as either a convertible note or a SAFE-like agreement, offering standardized terms for early-stage funding.
Both are designed to streamline early investments while deferring valuation discussions, but founders must track their terms, such as discount rates, valuation caps, and conversion triggers, to maintain transparency with investors.
Al-Anizy also advised explicit contractual clauses to ensure intellectual property rights are clearly vested in the company, safeguarding the business and maintaining investor trust.
Riyadh has become a magnet for multinational corporations, with around 600 foreign companies establishing their regional headquarters in the city since the launch of the Saudi Program for Attracting Regional Headquarters in 2021.
Spearheaded by the Ministry of Investment and the Royal Commission for Riyadh City, this initiative is a cornerstone of Vision 2030’s goal to position Saudi Arabia as a global business hub.
The program offers compelling incentives, including a 30-year tax relief package with 0 percent corporate and withholding taxes, streamlined setup processes, and access to world-class infrastructure.
Riyadh’s strategic location at the crossroads of Asia, Africa, and Europe, combined with its skilled workforce and economic stability, has made it the top choice for multinationals looking to expand in the region.
Riyadh’s appeal is further bolstered by business-friendly policies, including 100 percent foreign ownership in key sectors, tax incentives, and streamlined licensing through the Saudi Business Center. Startups also benefit from partnerships with major corporations like Aramco and STC, as well as accelerator programs from Flat6Labs and 500 Global.
With a population of 36 million and the largest economy in the Middle East and North Africa, Saudi Arabia offers startups access to a high-spending consumer base and a gateway to regional expansion. The Kingdom’s advancements in technology were recognized in the 2024 Global Innovation Index, where it secured the 47th spot among 132 countries.
Events such as the LEAP Tech Conference and Riyadh Season continue to draw global investors, while local success stories — from Tamara, Saudi Arabia’s first fintech unicorn delivering payments and banking, to Salla, an e-commerce platform empowering SMEs with digital storefronts — demonstrate Riyadh’s potential as a launchpad for high-growth companies.
Funding flows into frontier tech as startups race to scale
Darwinz AI will use the new capital to expand its Riyadh-based team
Updated 26 min 46 sec ago
Nour El-Shaeri
RIYADH: Startups across the Middle East and Africa are attracting fresh capital as investors double down on AI, fintech, proptech, and agri-tech solutions tailored to local and regional challenges.
Saudi Arabia-based Darwinz AI, known as TheDar.AI, has raised $325,000 in seed funding to accelerate development of its AI-powered productivity platform for communication professionals.
The round was led by Flat6Labs and Glint Ventures, marking a milestone for the startup as it deepens its presence in the Kingdom.
Originally founded in Egypt in 2021 by Emad El-Azhary and Mohy Aboualam, TheDar.AI has evolved into a regional AI player with operations now headquartered in Riyadh.
The company’s flagship platform, dima, functions as an AI copilot tailored for public relations professionals, marketers, and brand managers—offering automation features that aim to improve content workflows and campaign management.
According to the company, the new capital will be used to expand the Riyadh-based team, accelerate product development cycles, and prepare for a global launch.
Founded in 2024 by Anis Rahal, XFOLIO offers a cloud-based platform that integrates portfolio management with treasury automation. (Supplied)
“This round marks a new chapter,” said co-founder Aboualam. “We’re proud to call TheDar.AI a Saudi company with Egyptian roots, and we are excited to scale globally through the thriving ecosystem here. Stay tuned — the best is yet to come.”
The investment reflects growing interest in generative AI applications in the Gulf region, especially in sectors like marketing and enterprise communications, where automation and digital transformation are accelerating.
XFOLIO raises $2m to modernise treasury and wealth management
French-Lebenese Fintech platform XFOLIO has raised $2 million in seed funding to enhance its enterprise-focused digital infrastructure for financial institutions and wealth managers.
The investment round was led by Middle East Venture Partners, and is aimed at expanding the startup’s product capabilities and market reach. Founded in 2024 by Anis Rahal, XFOLIO offers a cloud-based platform that integrates portfolio management with treasury automation.
It is designed to help financial institutions, family offices, and mid-sized wealth managers consolidate both bankable and non-bankable assets—providing a unified view of financial holdings and automating key back-office operations.
The capital will be used to launch AI-powered recommendation tools and enable cross-bank trading, two features the company believes will enhance decision-making efficiency and improve market access for underserved clients.
Prop-AI raises $1.5m to digitise real estate decisions
UAE-based proptech startup Prop-AI has secured $1.5 million in pre-seed funding to expand its AI-driven real estate intelligence platform.
The round was led by Plus VC, with contributions from Joa Capital, Select Ventures, Oraseya Capital, Plug & Play, and angel investors from Saudi Arabia and Bahrain.
Founded in 2023 by Ranime El-Skaff and Christian Kunz, Prop-AI uses artificial intelligence and machine learning to automate real estate search, valuation, and investment decision-making.
We’re proud to call TheDar.AI a Saudi company with Egyptian roots, and we are excited to scale globally through the thriving ecosystem here.
Mohy Aboualam Darwinz, AI co-founder & CEO
The platform caters to property buyers, investors, and real estate professionals seeking data-driven insights and automated analytics.
The funding will be used to integrate more regional data sets, enhance AI infrastructure, and launch new enterprise tools.
The startup also plans to scale across the MENA region and into European markets.
“Our mission is to build the ‘Bloomberg of Real Estate’,” said Ranime El-Skaff, CEO of Prop-AI.
DisrupTech backs Winich Farms in Sub-Saharan Africa debut
Cairo-based DisrupTech Ventures has made its first Sub-Saharan Africa investment by backing Winich Farms, a Nigerian agri-fintech startup, in its ongoing pre-series A round.
The move signals the fund’s broader interest in scalable fintech solutions addressing critical needs in Africa’s agriculture economy.
Winich Farms operates in 29 of Nigeria’s 36 states and has built a platform focused on improving financial inclusion and market access for over 180,000 smallholder farmers.
The company connects producers directly with buyers and provides access to financing tools that reduce post-harvest losses and price volatility.
The startup plans to expand its operations beyond Nigeria and explore export opportunities into the MENA region, positioning itself as a cross-continental player in agri-fintech innovation.
“Our investment in Winich reflects our conviction in the potential of Nigeria’s agri-fintech sector and the scalability of its model,” said Mohamed Okasha, managing partner at DisrupTech Ventures.
“Winich is not only solving real problems for smallholder farmers but doing so with a scalable model. Agriculture is also core to Egypt’s economy, and we look forward to sharing insights and best practices between both markets as Winich grows across the continent.”
Octane raises $5.2m to streamline fleet payments
Egyptian fintech Octane has raised $5.2 million in a funding round led by Shorooq Partners, Algebra Ventures, and SC Holding.
The Cairo-based company was co-founded in 2022 by Amr Gamal and Ziad Eladawy, and offers a closed-loop wallet system that consolidates fleet-related expenses including fuel, maintenance, and petty cash.
Octane targets fleet operators and logistics companies that currently rely on fragmented financial systems.
Its platform provides tools for financial control, analytics, and cost optimisation.
“At Octane, we’re focused on giving fleets the rails they need to manage day-to-day payments with precision,” said Amr Gamal, Co-Founder and CEO of Octane.
“This funding lets us broaden our acceptance network, expand AI-powered fraud detection and route optimisation features, and stay ahead of the shift toward cleaner, more efficient mobility, without adding complexity for our customers.”
The startup plans to use the new funds to grow its merchant network, expand regionally, and integrate more AI capabilities into its transaction processing and route planning tools.
OCTA secures $20m credit line to support SME automation
UAE-based fintech OCTA has secured a $20 million credit facility from Sukna Fund for Direct Financing, reinforcing its mission to embed financial services into the daily operations of small and medium-sized enterprises.
The new facility follows OCTA’s $2.25 million pre-seed round closed in October 2024, co-led by Quona Capital and Sadu Capital.
Founded in 2024 by Jon Santillan, Andrey Korchak, and Nupur Mittal, OCTA automates the contract-to-cash process for SMEs—covering invoicing, collections, payments, and now embedded credit.
The company claims to offer a unified platform that helps SMEs overcome working capital constraints and cash flow inefficiencies.
“Most SMEs don’t fail because they lack revenue — they fail because their cash is locked up,” said Jon Santillan, co-founder and CEO of OCTA.
“Our partnership with Sukna Fund allows us to bring financing directly into the heart of daily operations, where businesses need it most.”
The funds will help OCTA scale across Saudi Arabia and other Gulf markets as it targets the underserved mid-market SME segment.
SaturnX raises $3m to expand stablecoin-based remittances
Dubai-based SaturnX has closed a $3 million seed round led by White Star Capital, with additional support from institutional backers.
Founded in 2024 by Mirnas Brescic, SaturnX provides an API-based infrastructure layer for stablecoin payments, designed specifically for business-to-business financial service providers.
The new capital will support expansion into Southeast Asia, with initial focus on high-volume remittance corridors such as the Philippines, Bangladesh, and Pakistan.
SaturnX also plans to enhance compliance and enterprise features on its API platform.
“Our vision is to connect the worlds of decentralised and traditional finance with infrastructure that brings the benefits of stablecoins to everyday financial use cases,” said Mirnas Brescic, CEO and Founder of SaturnX.
“Despite considerable progress, cross-border payments are still expensive and slow. By offering a faster, cheaper, and programmable alternative, we’re helping financial partners unlock better ways to move money.”
Pakistan signs $4.5 billion loans with local banks to ease power sector debt
The government, which owns much of the power infrastructure, is grappling with ballooning ‘circular debt’
The liquidity crunch has disrupted supply, discouraged investment and added to fiscal pressure on Islamabad
Updated 21 June 2025
Reuters
KARACHI: Pakistan has signed term sheets with 18 commercial banks for a 1.275 trillion Pakistani rupee ($4.50 billion) Islamic finance facility to help pay down mounting debt in its power sector, government officials said on Friday.
The government, which owns or controls much of the power infrastructure, is grappling with ballooning “circular debt”, unpaid bills and subsidies, that has choked the sector and weighed on the economy.
The liquidity crunch has disrupted supply, discouraged investment and added to fiscal pressure, making it a key focus under Pakistan’s $7 billion IMF program.
Finding funds to plug the gap has been a persistent challenge, with limited fiscal space and high-cost legacy debt making resolution efforts more difficult.
“Eighteen commercial banks will provide the loans through Islamic financing,” Khurram Schehzad, adviser to the finance minister, told Reuters.
The facility, structured under Islamic principles, is secured at a concessional rate of 3-month KIBOR, the benchmark rate banks use to price loans, minus 0.9 percent, a formula agreed on by the IMF.
“It will be repaid in 24 quarterly instalments over six years,” and will not add to public debt, Power Minister Awais Leghari said.
Existing liabilities carry higher costs, including late payment surcharges on Independent Power Producers of up to KIBOR plus 4.5 percent, and older loans ranging slightly above benchmark rates.
Meezan Bank, HBL, National Bank of Pakistan and UBL were among the banks participating in the deal.
The government expects to allocate 323 billion rupees annually to repay the loan, capped at 1.938 trillion rupees over six years.
The agreement also aligns with Pakistan’s target of eliminating interest-based banking by 2028, with Islamic finance now comprising about a quarter of total banking assets.
Saudi gold demand defies price surge amid cultural, digital shift
Updated 20 June 2025
Nadin Hassan
RIYADH: Gold prices may be at record highs, but that has not stopped Saudi consumers from buying. In the first quarter of 2025, demand for gold jewelry in the Kingdom jumped 35 percent year on year, even as global demand fell 21 percent, according to the World Gold Council.
That surge comes amid a global price rally, with gold breaching $3,500 per ounce in April, up from around $2,370 a year earlier — driven by geopolitical tensions, inflation fears, and aggressive central bank buying.
“This rapid increase in the price of the bullion can be attributed to one main reason – central bank buying,” Vijay Valecha, chief investment officer at Century Financial, told Arab News.
Yet despite the soaring cost, Saudi Arabia’s deep-rooted gold culture continues to shine, with consumers purchasing 11.5 tonnes of gold jewelry in the first quarter, up from 8.5 tonnes a year earlier.
“This feat occurred despite the 34 percent rise in prices in early 2025, demonstrating Saudi consumers’ strong demand and purchasing power,” said Valecha.
Vijay Valecha, chief investment officer at Century Financial. Supplied
Gold in the Kingdom is more than a financial asset — it represents tradition, adornment, and intergenerational wealth. From bullion bars to minimalist 18-carat jewelry, Saudi buyers are proving resilient even as other regional markets, such as the UAE and Kuwait, witness sharp declines in demand.
Hamza Dweik, head of trading for the MENA region at Saxo Bank, emphasized gold’s cultural role, telling Arab News: “Gold is deeply embedded in Saudi traditions, especially during weddings and festive occasions. This cultural attachment ensures a steady baseline of demand, even during price surges.”
Global factors
Valecha explained that following the conflict in Ukraine, many countries grew concerned about holding excessive reserves in US dollars, prompting nations such as China and Russia to increase their gold purchases.
“China has spearheaded record levels of global central bank purchases of gold. Hence, looking ahead, the trend of gold buying by central banks is expected to continue,” he added.
Another push came in May, when Moody’s downgraded the US credit rating from Aaa to Aa1, citing “a sustained increase in government debt (exceeding $36 trillion), rising interest payment ratios, and persistent fiscal deficits exacerbated by political dysfunction and policy uncertainty.”
Valecha added that this marked the first time the US lost its top-tier rating from all three major agencies.
Cultural drivers
In different parts of the Kingdom, people buy gold for different reasons. In the north, around 70 percent of buyers view gold primarily as an investment, while in the south, it is more closely tied to tradition and adornment. Gold bars and coins are also gaining popularity, with people stocking their safes with bars of varying weights and purity.
In the first quarter, gold demand in Saudi Arabia grew 15 percent year on year to 4.4 tonnes. Jewelry preferences are also shifting — from favoring diamonds to a growing obsession with gold.
More young buyers are opting for 18-carat pieces due to their affordability, modern style, and lighter tone, as they appear less yellow than 21- and 24-carat gold.
“They also have a less flashy design/colour, which makes them better for everyday use,” Valecha explained.
Hamza Dweik, head of trading for the MENA region at Saxo Bank. Supplied
Digital platforms and online gold purchases are also on the rise, blending tradition with technology — from buying fractional gold and using savings apps to investing through exchange-traded funds.
“Younger generations are blending tradition with technology — embracing digital gold platforms, fractional ownership, and ETFs, while still participating in cultural gifting. This is reshaping how gold is marketed and consumed,” Dweik added.
While countries including the UAE and Kuwait have seen gold demand decline, Saudi Arabia is moving in the opposite direction, with domestic consumers leading the surge, supported by strong spending habits.
Consumer spending in the Kingdom hit an all-time high in March, rising 17 percent to SR148 billion ($39.44 billion) — the highest monthly increase since May 2021 — before easing to SR113.9 billion in April.
The shift in consumer behavior is evident across the Kingdom. Jewelers in Riyadh spoken to by Arab News reported a growing interest in custom pieces, lighter-weight ornaments, and contemporary designs that suit both festive occasions and everyday wear.
The 18-carat trend, once seen as a budget-friendly option, has become a fashion choice, according to the jewelers. More women are purchasing gold for themselves, breaking away from the traditional gift-only narrative.
While physical stores remain popular for high-value purchases, particularly during wedding seasons and religious festivals, digital platforms are making inroads. Online retailers like L’azurde are adapting to this demand by offering buy-now-pay-later plans, making gold more accessible to a wider audience. Popular jewelry items include 21-carat necklaces and rings, while younger buyers favor 18-carat pieces for daily wear.
Market outlook
Looking ahead, both Valecha and Dweik expect prices to remain strong. Valecha predicts gold could reach $3,700 per ounce by year-end, though he cautions short-term investors. “Buyers should assess their investment horizon — long-term holders may still find value, while short-term buyers should be mindful of volatility,” he said.
“Sustained central bank purchases, heightened investor appetite in a period of uncertainty in the economic landscape, and projected interest rate cuts drive this bullish projection. The projected price under a recession scenario is as high as $3,880 per ounce,” Valecha added.
Dweik agreed, and said: “While structural drivers support continued growth, potential corrections could occur if inflation eases or interest rates rise.”
Saudi Arabia may also be poised to grow into a regional gold trading hub. Valecha believes that with the right infrastructure and regulatory framework, the Kingdom could play a larger role in the global market. “To elevate its status, a modern, transparent gold market ecosystem and enhanced refining capabilities would be essential,” he said.
With deep-rooted traditions, rising investment activity, and a modernized retail environment, Saudi Arabia’s gold market is not only resilient — it is evolving. In a time of global uncertainty, gold continues to shine across the Kingdom.
