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Build lose money. Don't build also lose money
Matthew Martin
Saudi Arabia Bureau Chief
Jun 7, 2026, 6:31pm GMT+8
Gulf
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Semafor illustration. Photos courtesy of NEOM.
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The vast, futuristic new city in northwestern Saudi Arabia was at one point projected to cost more than $1 trillion to build. Now, NEOM’s budget for 2026 through to 2030 includes 60 billion riyals ($16 billion) in anticipated payments to contractors to terminate long-term agreements, according to people familiar with the matter. The payments, tied to penalty clauses, demonstrate that even halting parts of the project will be expensive nearly a decade after Crown Prince Mohammed bin Salman unveiled the development.
Years of budget deficits and missing targets for foreign investment have led the government to embark on a wave of cutbacks to its ambitions as it reevaluates the cost of its plan to transform the economy and slash its dependence on oil. The kingdom is also accelerating spending on defense — which has taken on an even greater importance because of the war with Iran — and investments tied to artificial intelligence, logistics, and infrastructure needed for Expo 2030 and the 2034 men’s soccer World Cup.
The projected cancellation costs to halt construction on projects like The Line, a pair of mirrored skyscrapers running from the coast into the desert, are equal to more than a third of the government’s projected 2026 budget deficit. The final amount it will have to pay to cancel contracts may change depending on negotiations with contractors, the people said.
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Matthew Martin
Saudi Arabia Bureau Chief
Jun 7, 2026, 6:31pm GMT+8
Gulf
Share
Sign up for Semafor Gulf: Navigating the region’s capital, influence, and power. Read it now.
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The Scoop
Saudi authorities expect to spend more money canceling projects at NEOM than building them over the next five years, the latest sign of retrenchment of what was one of the world’s most ambitious development projects.The vast, futuristic new city in northwestern Saudi Arabia was at one point projected to cost more than $1 trillion to build. Now, NEOM’s budget for 2026 through to 2030 includes 60 billion riyals ($16 billion) in anticipated payments to contractors to terminate long-term agreements, according to people familiar with the matter. The payments, tied to penalty clauses, demonstrate that even halting parts of the project will be expensive nearly a decade after Crown Prince Mohammed bin Salman unveiled the development.
Years of budget deficits and missing targets for foreign investment have led the government to embark on a wave of cutbacks to its ambitions as it reevaluates the cost of its plan to transform the economy and slash its dependence on oil. The kingdom is also accelerating spending on defense — which has taken on an even greater importance because of the war with Iran — and investments tied to artificial intelligence, logistics, and infrastructure needed for Expo 2030 and the 2034 men’s soccer World Cup.
The projected cancellation costs to halt construction on projects like The Line, a pair of mirrored skyscrapers running from the coast into the desert, are equal to more than a third of the government’s projected 2026 budget deficit. The final amount it will have to pay to cancel contracts may change depending on negotiations with contractors, the people said.
