Saudi budget deficit widens as oil volatility tests spending drive

RIYADH – Saudi Arabia recorded a wider budget deficit in the fourth quarter of 2025, underscoring mounting fiscal pressures as the kingdom maintains heavy spending under its economic transformation agenda despite continued volatility in global oil markets.

According to figures released by the Saudi Ministry of Finance, the fiscal deficit reached 94.85 billion riyals ($25.28 billion) in the final three months of the year, up from 88.5 billion riyals ($23.59 billion) in the third quarter. The increase reflects a faster pace of government expenditure compared with revenue growth.

Total spending climbed to 371 billion riyals ($98.89 billion) in the fourth quarter, compared with 358.4 billion riyals in the preceding quarter. Revenues also rose, but at a more modest rate, reaching 276 billion riyals ($73.57 billion) from 269 billion riyals previously. The divergence highlights the kingdom’s continued expansionary fiscal stance aimed at accelerating development projects and economic diversification under Vision 2030.

Oil remains the backbone of Saudi public finances, and while crude revenues edged up quarter-on-quarter to 154.2 billion riyals ($41.1 billion) amid higher production, the broader annual picture was less favourable. Total oil income in 2025 fell by around 20 percent compared with the previous year, reflecting weaker global prices.

With Brent crude trading well below the estimated fiscal breakeven price, projected by Bloomberg Economics at roughly $97 per barrel for 2025, the kingdom has faced a persistent gap between expenditure commitments and hydrocarbon income.

Non-oil revenues rose to 122.6 billion riyals ($32.7 billion) in the fourth quarter from 119 billion riyals in the third. However, on an annual basis, growth remained largely flat compared with 2024, suggesting that diversification efforts are advancing steadily but have yet to fully offset fluctuations in oil receipts.

The government’s strategy prioritises long-term structural transformation, accepting short-term deficits to accelerate investment in infrastructure, tourism, technology and manufacturing. Officials argue that future returns from these sectors will ease dependence on oil and strengthen fiscal resilience.

For 2025 as a whole, the budget deficit reached approximately 276 billion riyals ($73.6 billion), significantly higher than earlier official projections of 245 billion riyals. The shortfall equates to around 5.5 percent of GDP, marking the largest deficit in five years.

To finance the gap, Saudi Arabia has stepped up borrowing. Public debt rose to 1.52 trillion riyals ($405 billion) by the end of 2025, up from 1.22 trillion riyals a year earlier. The increase reflects continued reliance on domestic and international bond markets to sustain spending on mega-projects linked to Crown Prince Mohammed bin Salman’s reform programme.

The widening deficit has also prompted adjustments, with some large-scale developments reportedly delayed or scaled back as authorities seek to balance growth ambitions with fiscal sustainability.

While the fourth-quarter data point to improving revenues and stable economic activity, they also highlight the delicate balancing act facing policymakers. Sustained high spending supports growth and job creation, but prolonged deficits raise questions about debt management and servicing costs if oil prices remain volatile.

Saudi officials expect the deficit to narrow to around 3.3 percent of GDP this year, though private-sector analysts forecast a higher figure, potentially between 5 and 6 percent.

The latest figures present a dual picture of Saudi Arabia’s finances: steady progress in diversification and economic expansion on one hand, and continued exposure to oil price swings and rising debt on the other, a transitional phase in the kingdom’s ambitious economic overhaul.