budget saudi arabia: Everything You Need to Know About the Saudi Budget

The Saudi general budget is the annual document issued by the Ministry of Finance, outlining the government's projections for revenues and expenditures for the new fiscal year. The budget is a central tool for shaping economic policy and directing resources toward national priorities such as education, healthcare, infrastructure, and social support. It typically reflects fiscal trends within the framework of national transformation programs and Vision 2030, as the state seeks to diversify income sources and reduce dependence on oil revenues.

The budget serves as a mechanism for expenditure control and investment allocation to targeted sectors in the state's strategic plan. It also plays a role in supporting economic stability, as the government strives to balance economic growth with efficient public spending. Budget policies are reflected in macroeconomic performance, inflation rates, unemployment, and the flow of domestic and foreign investments.

During 2024 and 2025, the Saudi budget underwent significant changes due to global oil price fluctuations and pressures on oil revenues. In 2024, oil prices declined noticeably compared to government targets, leading to a drop in oil revenues. On the other hand, the government continued spending on major development projects and social support programs, resulting in expectations of a relative budget deficit.

To address this deficit, the government resorted to borrowing through the issuance of local and international sukuk and bonds, while maintaining high levels of foreign reserves. Meanwhile, non-oil revenues grew thanks to economic reforms and increased government taxes, such as value-added tax and the expansion of the tax base on services and commercial activities. For 2025, official forecasts are optimistic about a slight recovery in oil prices, with continued focus on growing non-oil revenues and enhancing private sector participation in the national economy.

Oil revenues constitute the main source of income in the Saudi budget, often accounting for 60-70% of total government revenues. The volume of oil revenues depends on global oil prices and local production levels, making the budget vulnerable to international market fluctuations. Alongside oil, the Saudi government has worked to develop non-oil income sources in recent years, in line with Vision 2030 objectives.

These sources include: taxes (such as value-added tax), government service fees, returns from government investments, profits from state-owned companies (such as Saudi Aramco), and revenues from emerging sectors like tourism and entertainment. This diversification aims to strengthen budget resilience and reduce oil dependency, especially during periods of price declines or global economic changes.

Government expenditures in the Saudi budget are distributed between operational expenses (such as salaries, current expenses, social support) and developmental expenses (investment in infrastructure projects, education, healthcare, renewable energy, and human capital development). Vital sectors like education and healthcare account for significant portions of government spending, as the Kingdom seeks to develop human capital and improve quality of life.

The budget also allocates substantial funds for national transformation projects and economic diversification, such as the creation of NEOM city, tourism sector development, and financing renewable energy projects. However, oil price volatility sometimes necessitates reprioritization or the reduction of non-essential expenditures, especially during periods of fiscal deficit. The Saudi government continuously works to enhance spending efficiency through performance review and financial evaluation programs for its agencies and institutions.

The heavy reliance on oil revenues makes the Saudi budget highly sensitive to global oil price fluctuations. Rising prices positively impact government revenues, enabling increased spending and the achievement of fiscal surpluses. Conversely, price declines—as seen in 2024—lead to reduced revenues and budget deficits, prompting the government to seek alternative financing such as borrowing or tapping into reserves.

To manage these fluctuations, the Kingdom has adopted hedging fiscal policies, such as supporting the Public Investment Fund and increasing allocations to sovereign wealth funds, alongside plans to accelerate non-oil sector development. Saudi Arabia also works within the "OPEC+" alliance to regulate production and ensure relative market stability, though geopolitical and global economic factors remain beyond full control, making it essential to continue developing flexible financial tools and maintaining strong reserves.

Saudi Arabia has for years pursued a strategy of investing in mega projects to achieve economic transformation and diversify income sources. Key projects include NEOM city (with an estimated cost of up to $500 billion), Qiddiya, the Red Sea Project, and renewable energy programs. These projects are engines for future economic growth, providing thousands of jobs for citizens and attracting direct foreign investment.

However, funding these projects requires substantial government spending, which can sometimes increase the fiscal deficit, especially amid declining oil revenues. Therefore, the government has financed some of these projects through bond and sukuk issuances, attracting private sector partnerships, and establishing specialized investment funds. Successful execution and sustainable returns from these projects are key to long-term fiscal balance.

In recent years, Saudi Arabia has launched a series of fiscal and tax reforms to boost non-oil revenues and improve government spending efficiency. Notable reforms include increasing the value-added tax rate, imposing new taxes and fees on certain goods and services, and expanding the tax base for commercial activities.

Government subsidies for some products and services have also been gradually reduced to better target support to those most in need. At the same time, initiatives have been launched to improve the business environment, attract foreign investment, and streamline company formation processes. These reforms aim to strengthen the state's fiscal position and enhance the competitiveness of the Saudi economy regionally and globally.

Given the budget deficit resulting from oil revenue fluctuations and increased spending, the Saudi government has increasingly relied on public debt instruments to finance its projects. This includes issuing bonds and sukuk in Saudi riyal and US dollars, as well as borrowing from international and local markets.

This policy reflects investor confidence in the Saudi economy, as the Kingdom is considered one of the most creditworthy countries in the region. Nevertheless, monitoring the level of public debt and the debt service-to-GDP ratio remains a priority to ensure limits are not exceeded. The government works to diversify funding sources and attract both local and international liquidity to support the sustainability of development projects.

The Saudi budget plays a pivotal role in stimulating various economic sectors. Increased spending on infrastructure projects boosts the construction and contracting sector, while investments in renewable energy and technology support the Kingdom's transition toward a knowledge-based economy.

The oil and gas sector remains the main driver of the economy, with Saudi Aramco continuing as the state's largest profit generator. Mining, petrochemicals, tourism, and entertainment sectors have also seen notable growth thanks to government allocations and regulatory support. The financial services sector has benefited from legislative reforms and an expanded investor base in the Saudi financial market (Tadawul).

Saudi Arabia stands out as having the largest budget in the Gulf region, positioning it as a regional leader in terms of government spending and investment. Its budget far exceeds those of countries like the UAE, Kuwait, and Qatar, giving it greater capacity to finance mega infrastructure projects and economic development programs.

However, the Kingdom faces strong competition in attracting foreign capital from its Gulf neighbors, who offer various investment incentives. Saudi companies—led by Aramco and SABIC—also compete with regional and global players in oil, energy, and petrochemicals. The Kingdom’s success in diversifying its economy and achieving sustainable growth depends on its ability to manage the budget effectively amid regional and global changes.

The Saudi budget indirectly affects the performance of the Saudi financial market (Tadawul). When the government announces an expansionary budget targeting investment in new sectors, this positively reflects on the share prices of companies operating in those sectors. Conversely, a large deficit or spending cuts may lead to reduced investor confidence and lower market liquidity.

Government plans to develop non-oil sectors and stimulate the private sector also create new investment opportunities in the financial market, attracting both local and foreign capital. Transparency in budget announcements and revenue and expenditure forecasts plays a crucial role in shaping investor sentiment and the strategies of major investment funds.

The Saudi budget faces several risks and challenges, most notably: oil price volatility, rising public debt if borrowing continues to finance mega projects, inflationary pressures from increased spending, and the challenge of generating sufficient non-oil revenues to offset declines in oil income.

Additionally, international crises such as economic recessions or global pandemics could negatively impact non-oil sectors like tourism. The Saudi government manages these risks through flexible fiscal policies, strengthening government reserves, and diversifying the economy by supporting innovation and investment in promising sectors.

The Saudi general budget is a key tool for achieving the objectives of Vision 2030, focusing on developing non-oil sectors, enhancing the role of the private sector, and attracting foreign investment. The government allocates significant spending to projects in education, infrastructure, renewable energy, and tourism, aiming to build a diversified and sustainable economy.

With ongoing fiscal and administrative reforms and a shift toward more transparent and efficient financial management, there are positive prospects for improving the Kingdom's financial and economic performance. However, achieving Vision 2030 goals requires continued initiatives to address risks, improve spending efficiency, and develop new income sources that keep pace with global changes.