The Saudi Fund for Development (SFD) signed a $15mn development loan with the Republic of Palau on April 7, marking the fund's first partnership with the Pacific island nation, Business Wire reported.

SFD chief executive Sultan Abdulrahman al-Marshad and Palauan President Surangel Whipps Jr signed the agreement in the capital Ngerulmud. The loan will be channelled through Palau's National Development Bank to finance projects led by local developers, businesses and entrepreneurs.

"This agreement is about building a stronger Palauan economy," Whipps said, adding that the financing would "create jobs, unlock investment, and keep more value here at home." He said the funds would prioritise affordable, climate-resilient housing to give young Palauans "more reasons to build their future in Palau."

Al-Marshad said the deal embodied SFD's "broader mission to foster prosperity across island nations."

The SFD has supported development projects in 18 island nations across the Caribbean and Pacific. The fund has financed more than 800 projects in over 100 countries with a total value exceeding $22bn since its establishment in 1974.

Saudi Arabia's outreach to a small Pacific state comes as Riyadh pursues a broader diplomatic and economic strategy under Vision 2030.

The kingdom has been expanding its development financing footprint in regions where it has historically had limited presence, competing with China, which has been signing its own security and economic agreements across the Pacific.

New Zealand and the Cook Islands signed a defence and security agreement on April 2 that effectively sidelined earlier deals between the Cook Islands and China, reflecting growing geopolitical competition in the Pacific.