- 2026 budget projects deficit of 165 billion riyals.
- Saudi Arabia halfway through Vision 2030 strategy.
- Next phase of Vision 2030 plan will stress implementation.
Saudi Arabia approved its state budget for 2026 on Tuesday, forecasting a narrower fiscal deficit as it shifts spending to priority sectors like industry and logistics in a push to increase non-oil revenue.
The kingdom projected a deficit of 165 billion riyals ($44 billion), or about 3.3% of gross domestic product. That would be down from the 245 billion riyals it now estimates for this year after lower oil prices and production weighed on revenue, and spending overshot the budgeted level by around 4%.
The world’s top oil exporter, Saudi Arabia, is more than halfway through its Vision 2030 blueprint for economic transformation. The strategy, introduced by Crown Prince Mohammed bin Salman in 2016, calls for hundreds of billions of dollars in government investments to wean the kingdom’s economy off its dependence on hydrocarbon revenues.
According to the budget, 2026 will mark the start of a “third phase” of Vision 2030, signalling a shift in focus from launching economic reforms to maximising their impact.
The crown prince described the new phase as “accelerating the pace of progress and increasing growth opportunities to achieve a sustainable impact beyond 2030,” according to state news agency SPA.
A shift in spending but few specifics
The change in tone comes as Riyadh moves to refocus its $925 billion sovereign wealth fund away from delayed massive real estate projects toward sectors including logistics, minerals, artificial intelligence and religious tourism.
“Our level of spending in the last three budget cycles has been consistent, but now it is about what we are spending on, rather than how much we are spending,” Finance Minister Mohammed Al Jadaan told Reuters ahead of the budget release.
The budget included a few specific targets for that new focus; however, beyond setting a target of over 20 million visitors from abroad for the Umrah pilgrimage to Mecca in 2026, a sharp increase from the 15 million pilgrims expected this year.
Saudi to run ‘deficit by design’ until 2028, finmin says
Total expenditure is projected at 1.31 trillion riyals in 2026, lower than an estimated 1.34 trillion riyals this year. Total revenue is forecast at 1.15 trillion riyals, slightly up on the estimated 1.1 trillion riyals in 2025.
“This is a deficit by design,” Jadaan said in a media briefing on Monday. “We, by policy choice, will have a deficit until (20)28.”
The expected leap in the 2025 deficit to more than double the budgeted target of 101 billion riyals would put the shortfall at 5.3% of GDP, up from an initial target of 2.3%.
Revenues this year are estimated to miss the budgeted target by about 7.8%, while spending is seen 4% higher.
Public debt is expected to reach approximately 1.5 trillion riyals by the end of 2025 – about 31.7% of GDP – up from 1.2 trillion riyals in 2024 to help meet financing needs this year, the finance ministry said.
“The still low government debt level provides space for this fiscal stance, though it is vulnerable to a further fall in the oil price,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
Recalibrating to ensure projects deliver
The Saudi government and the nation’s almost $1 trillion Public Investment Fund have both undergone a review of project and spending priorities, Jadaan told Reuters.
Some demands that seemed to be overly ambitious in terms of time frame or investment were scaled back to more reasonable objectives, he said.
Reuters reported in October that the PIF is preparing to shift away from the real estate gigaprojects that have dominated its development goals for the last decade.
In a departure from this year’s spending package, the 2026 budget made no mention of specific gigaprojects such as NEOM or the Sindalah island resort.
The PIF, like the finance ministry, is making sure initial plans for projects “are recalibrated to ensure that they are delivering what they are meant to deliver”, Jadaan said.
