- The 2026 budget projects a deficit of 165 billion riyals.
- Saudi Arabia halfway through the Vision 2030 strategy.
- The next phase of the Vision 2030 plan will emphasize implementation.
Saudi Arabia approved its 2026 state budget on Tuesday, forecasting a narrower fiscal deficit as it shifts spending to priority sectors such as industry and logistics in a push to boost non-oil revenue.
The kingdom expected 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 revenues and spending exceeded budgeted levels by about 4%.
The world’s largest oil exporter, Saudi Arabia, is more than halfway through its Vision 2030 plan for economic transformation. The strategy, introduced by Crown Prince Mohammed bin Salman in 2016, calls for hundreds of billions of dollars in government investment 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, signaling a shift in focus from implementing economic reforms to maximizing their impact.
The crown prince described the new phase as “accelerating the pace of progress and increasing growth opportunities to achieve a sustainable impact after 2030,” according to state news agency SPA.
A shift in spending, but few details
The change in tone comes as Riyadh moves to refocus its $925 billion sovereign wealth fund away from delayed massive real estate projects towards 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’s about what we spend on rather than how much we spend,” Finance Minister Mohammed Al Jadaan said. Reuters prior to the release of the budget.
The budget included a few specific goals for the new focus; however, in addition to setting a target of over 20 million visitors from abroad for the Umrah pilgrimage to Mecca by 2026, a sharp increase from the 15 million pilgrims expected this year.
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Total spending is expected to be 1.31 trillion riyals in 2026, down from an estimated 1.34 trillion riyals this year. Total revenue is expected to be 1.15 trillion riyals, slightly up from the estimated 1.1 trillion riyals in 2025.
“This is a deficit by design,” Jadaan said in a media briefing on Monday. “After the political election, we will have a deficit until (20)28.”
The projected jump in the 2025 deficit to more than double the budgeted target of 101 billion riyals would put the deficit at 5.3% of GDP, up from an initial target of 2.3%.
Revenue this year is estimated to reach the budgeted target by around 7.8%, while expenditure 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 level of government debt gives room for this fiscal stance, although it is vulnerable to a further drop in oil prices,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
Recalibrating to ensure projects deliver
The Saudi government and the country’s nearly $1 trillion public investment fund have both undergone a review of project and spending priorities, Jadaan said Reuters.
Some demands that seemed overly ambitious in terms of time frame or investment were scaled back to more reasonable goals, he said.
Reuters reported in October that PIF is preparing to shift away from the real estate megaprojects that have dominated its development goals for the past decade.
In a departure from this year’s spending package, the 2026 budget did not mention any specific giga projects such as NEOM or Sindalah Island.
The PIF, like the finance ministry, ensures that initial plans for projects are “recalibrated to ensure they deliver what they are meant to deliver”, Jadaan said.
