Ryad (AFP)

Eight billion dollars. It is the sum invested in the middle of the Covid-19 crisis by the sovereign fund of Saudi Arabia in behemoths of the world economy, from Boeing to Facebook, a frenzy that contrasts with the austerity measures unprecedented in the kingdom .

The double shock of the Covid-19 pandemic and the collapse of oil prices prompted the government to triple the value added tax (VAT), suspend allocations and cut spending to stem the growth of its budget deficit.

These drastic measures put a strain on a so-called "rentier" social contract which, for decades, has seen the kingdom use its oil wealth to provide citizens with generous subsidies, jobs and a comfortable lifestyle. Without taxes.

But recently, the Public Investment Fund (PIF) - on its way to becoming one of the biggest bargain hunters - has spent billions to buy shares in leading foreign companies.

"We do not want to spoil a crisis," joked the governor of PIF, Yassir al-Roumayyan, in April, confirming that the fund, rich of 300 billion dollars, takes advantage of the slowdown in the world economy to afford shares at broken prices.

Boeing, Facebook, Total, Walt Disney, Starbucks, Marriott, Citigroup: in the first quarter of 2020, the public body bought $ 7.7 billion worth of shares.

The PIF also supports a proposed takeover of the British football club Newcastle United for approximately $ 372 million, although the deal appears to be in trouble due to accusations that Saudi Arabia is behind a chain of pirate sports television.

- "Throw money" -

"Companies are delighted to see their actions sought and their price increase," said Karen Young, a researcher at the American Enterprise Institute.

But in a country where VAT will triple to reach 15% from July, "it is more important to think about how the Saudis see the fact that their savings and the country's savings are spent on international markets", she believes.

In Ryad, traders wonder why these sums have not rather been used to support small and medium-sized businesses suffocated by the pandemic.

"A football club, entertainment, mega-projects. Throwing money in this way is absolutely useless in these times of austerity," laments an official, also a part-time chauffeur-driven driver to make ends meet.

The central bank's foreign exchange reserves fell sharply in March and April, with the government saying that $ 40 billion had been transferred to the PIF to finance its purchases.

Reserves, which fell to around $ 450 billion in April - their lowest level in years - are expected to decline further to finance the budget deficit according to analysts.

- "Big bets" -

Crown Prince Mohammed bin Salman, a strong man of the kingdom, has transformed the PIF into a power responsible for diversifying an ultra-dependent oil economy.

The organization says it is "actively looking for strategic opportunities, both in Saudi Arabia and around the world, that have great potential to generate significant returns in the long term."

"The PIF makes big bets on a few stocks. Smart or not, we won't know until we look in the rear view mirror," said Ali Shihabi, a Saudi expert.

Some of these "tactical" investments, like those in the struggling cruise ship Carnival, are in line with Ryad's goal of developing the fledgling tourism and entertainment industries, he added.

But many other acquisitions are "unlikely to produce a substantial return in the short term," according to Robert Mogielnicki, a researcher at the Washington-based Arab Gulf States Institute.

The investment in Facebook, which did not respond to requests from AFP, has raised concerns in the United States, where two former Twitter employees were accused last year of spying on behalf of the Saudi Arabia.

"We already know that the Saudis have agents on Twitter to spy on the dissidents," Ben Freeman, director of the Center for International Policy in Washington, told AFP. "Would the company end a disinformation campaign by one of its shareholders?"

© 2020 AFP