However, the report warns that increasing debt issuance to finance Vision 2030 projects could put pressure on Saudi Arabia's net asset position by the end of the decade.

Despite this, S&P Global expects the government to mitigate the impact through careful fiscal policies.

However, the report also notes that the fiscal deficits and debt accumulation could weaken the government's balance sheet sooner than expected returns on investment.

The text discusses the role of foreign investment, the private sector, and capital markets in financing Saudi Arabia's Vision 2030 economic diversification plan.

The Saudi government's sovereign wealth fund, Public Investment Fund (PIF), aims to invest $40 billion annually in the local economy.

The government will continue to support PIF by funding essential infrastructure for major projects.

Domestic banks are expected to continue playing a significant role in funding the public and corporate sectors despite efforts to boost external funding and diversify the investor base to reduce the impact on banks' liquidity.

According to S&P Global, Saudi Arabian domestic banks are expected to shift their focus from mortgage lending to corporate lending and funding for Saudi Arabia's Vision 2030 projects.

However, the banking system cannot meet all the financing needs associated with the vision, so banks will seek additional external funding.

In 2023, Saudi banks invested around $55 billion in the public and corporate sectors, and in 2024, banks are projected to grow their lending book by 8% to 9%.

About 70% of this lending is expected to be for corporates, which would allow banks to inject around $40 billion to $44 billion in financing for Vision 2030 projects.

The Saudi banking sector is projected to experience an 8% increase in deposits in 2024, with external debt issuance estimated at $10 billion to support lending growth.

The sector's robust condition was previously highlighted in an S&P Global report, which noted strong asset quality indicators, overall capitalization, and expectations for solid profitability and conservative dividend payouts.

Saudi banks have already accessed international capital markets and S&P Global anticipates this trend to continue for the next three to five years.

Additionally, the Saudi government and related entities are expected to inject deposits into the banking system, boosting credit growth.

S&P Global forecasts that some projects under Saudi Arabia's Vision 2030 will continue past the current decade, leading to a gradual boost in economic activity and foreign investment.

The Public Investment Fund (PIF) and the government will continue to invest through debt financing, but other entities like portfolio companies, private sector participants, and foreign direct investment (FDI) will also contribute to economic diversification.

The Kingdom aims to raise FDI inflows from the current 2% of GDP to 5.7% by 2030.

S&P Global suggests that the establishment of free economic zones and the regional headquarters program could accelerate FDI growth.

The text discusses the potential increase in foreign direct investment (FDI) in Saudi Arabia due to growing investment opportunities and regulatory improvements.

The government is making efforts to attract multinational companies by offering tax breaks and creating free economic zones.

The Saudi capital market is also playing a role in economic diversification by collaborating with the Capital Markets Authority to streamline processes and enhance market functionality and efficiency.

This will make debt and equity transactions more appealing and provide a more diversified funding base for Vision 2030 projects.

The text discusses how the Saudi government's ownership of Saudi Aramco, a company with a market capitalization over $7 trillion, can help support their Vision 2030 plan and prevent a debt bubble.

The government has already transferred a 16% stake in Aramco to the Public Investment Fund (PIF), which has increased the PIF's assets and provided dividend returns.

The government could sell more shares of Aramco through an IPO to raise additional financing for Vision 2030 projects.