Saudi Arabia plans to sustain elevated government spending and active borrowing over the coming years as it presses ahead with its economic diversification agenda, even as lower oil prices strain public finances. According to a budget statement released Tuesday, the Ministry of Finance expects expenditures to reach 1.3 trillion riyals ($350 billion) in 2026—slightly below this year’s level—and to remain near that pace through 2027. Revenues are projected to recover modestly after falling in the past year.
The kingdom anticipates running a budget deficit equivalent to 3.3% of GDP next year, compared with 5.3% in 2025. Both figures align with earlier forecasts, and the government expects the deficit to continue narrowing through 2027. Finance Minister Mohammed Al-Jadaan said the shortfall reflects deliberate policy choices aimed at supporting long-term growth. “We need to invest in our economy to enable the private sector, and as long as the return on these investments is higher than the cost of the debts, we would continue that drive for the foreseeable future,” he said at a briefing in Riyadh.
Saudi Arabia disclosed in late September that its 2025 deficit would more than double initial estimates as spending exceeded projections and revenues fell, largely due to lower oil prices. While oil-export earnings have rebounded since hitting their weakest level since 2021 in May, they remain below the five-year average. Brent crude prices continue to hover around $63 a barrel—well below levels needed to balance the budget of the world’s largest oil exporter.
The kingdom has adjusted several of Crown Prince Mohammed bin Salman’s marquee transformation projects over the past two years as it navigates extended periods of weak oil prices and recurring fiscal gaps. At the same time, Saudi Arabia has become one of the most active sovereign borrowers in emerging markets, raising nearly $20 billion this year in dollar- and euro-denominated debt. Officials say borrowing will remain an essential tool for financing the kingdom’s fiscal needs. Al-Jadaan emphasized that the government carefully calibrates its issuance strategy to avoid crowding out private-sector borrowing, noting that only about half of 2025’s financing needs were met via public markets.
Despite fiscal pressures, Saudi officials remain bullish about the economy’s trajectory, particularly in the non-oil sector, which now accounts for more than half of real GDP. The government expects overall economic growth of 4.6% in 2026 and 3.7% in 2027 as industries such as tourism, entertainment and advanced technology play a growing role in the national economy. Officials also stress that forecasts are based on conservative assumptions and that oil prices matter less to the budget than in the past, given the progress of the Vision 2030 agenda.
Vision 2030 is poised to enter a new phase in 2026, with a stronger emphasis on accelerating major initiatives intended to diversify Saudi Arabia’s economic base and reduce dependence on hydrocarbons. Analysts say continued government spending remains essential for maintaining momentum. “We continue to see budgeted spending level as still supportive for the economy,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. She added that although her team expects a larger deficit driven by softer revenues and some overspending, gross government debt is likely to stay below 40% of GDP. The main risk, she noted, remains the possibility of a sharp decline in oil prices.
