Why Saudi Arabia is planning the world's tallest skyscraper with oil prices tanking

The Jeddah Tower is currently 26 floors tall, but when completed will stretch 3,280 feet

Jeddah Economic Company and Saudi Arabia’s Alinma Investment have signed a deal to initiate SAR8.4 billion fund to finish the Jeddah Tower

Saudi Arabia has agreed a massive investment deal to fund the world's next tallest building - and the first to break one-kilometer tall.

The Jeddah Tower is currently 26 floors tall, but when completed will stretch 3,280 feet. That's 550m feet taller than the Burj Khalifa in Dubai, or twice as tall as the Empire State Building.

When plans for the Jeddah Tower were first revealed, it was a symbol of the national and personal prestige of the Saudi royal family and a way to showcase their economic power.

But that economic power rests on one resource: oil. The oil price has more than halved since last year and Saudi has defied proposals by the Organization of Petroleum Exporting Countries (OPEC) to cut production in order to stop the price falling futher.

It will not be the first time a so-called "prestige project" has masked underlying economic uncertainty in the Middle East. Just a few months before Dubai unveiled the $1.5 billion Burj al Khalifa, it had been forced to borrow cash from Abu Dhabi to deal with its debts.

Despite warnings from the IMF that Saudi Arabia's cash reserves are in free fall and that the country could run out of money in five years, the Jeddah Tower looks like it will go ahead after a $2.2 billion real estate deal was signed to fund its completion.

But why now?

There are hopes that the Jeddah Tower could help Saudi Arabia diversify out of oil by becoming a tourist attraction, like the Burj, and contribute to the revitalisation of the area.

“With this deal, we will reach new, as yet unheard of highs in real estate development... so that Jeddah may have a new iconic landmark,” said Mounib Hammoud, CEO of Jeddah Economic Company.

That would be one big achievement for the Saudi King Salman, who celebrates a year in power in January.