Saudi Arabia's 2026 budget reveals a bold strategy, but one that could spark debate. The kingdom forecasts a deficit of $44 billion, a move that might surprise some, especially as it's more than halfway through its ambitious Vision 2030 plan. But here's the catch: this deficit is by design, and it's all part of a larger plan to transform the country's economy.
Vision 2030, unveiled by Crown Prince Mohammed bin Salman in 2016, aims to reduce Saudi Arabia's reliance on oil revenue. The strategy involves massive government investments, and the upcoming 'third phase' of this plan will focus on implementation and maximizing the impact of these reforms.
The crown prince describes this new phase as a way to "accelerate progress and create more growth opportunities" beyond 2030. This shift in focus is evident in the budget, which allocates spending to priority sectors like industry, logistics, and tourism, rather than real estate projects that have dominated the country's development goals in the past.
Finance Minister Mohammed Al Jadaan emphasizes that it's not about how much they spend, but what they spend on. The budget includes a target of over 20 million visitors for the Umrah pilgrimage in 2026, a significant increase from this year's 15 million pilgrims.
However, the budget provides few specific details about this new focus. The total expenditure for 2026 is projected at 1.31 trillion riyals, lower than this year's estimated 1.34 trillion riyals. Total revenue is expected to reach 1.15 trillion riyals, slightly up from 2025's estimated 1.1 trillion riyals.
Jadaan explains that this deficit is a policy choice, and the country will run a deficit until 2028. The public debt is expected to rise to approximately 1.5 trillion riyals by the end of 2025, which is about 31.7% of GDP, to help meet this year's financing needs.
Chief economist Monica Malik from Abu Dhabi Commercial Bank believes the government's debt level still provides room for this fiscal stance, but it's vulnerable to further drops in oil prices.
The Saudi government and the Public Investment Fund have reviewed their project and spending priorities, scaling back some overly ambitious goals to more realistic objectives. The 2026 budget notably omits specific gigaprojects like NEOM and the Sindalah island resort, a departure from previous years.
PIF, like the finance ministry, is ensuring that initial project plans are "recalibrated" to meet their intended goals.
This strategy is a bold move by Saudi Arabia, and it will be interesting to see how these economic transformations unfold. What do you think? Is this a necessary step for Saudi Arabia's future, or does it raise concerns? Feel free to share your thoughts in the comments!
