Saudi Arabia is doing something that might seem confusing; it’s spending more, borrowing more, and pushing ahead with massive economic projects, even though oil prices are far too low to balance the budget.
According to the new 2026 budget outline released on Tuesday, Riyadh plans to spend 1.3 trillion riyals (about $350 billion) next year and keep it at roughly that level through 2027. That kind of spending locks in a deficit of about 3.3% of GDP in 2026. But here’s the part many outsiders miss: in Saudi Arabia, deficits are not viewed as a danger signal. They’re viewed as a tool.
Finance Minister Mohammed Al-Jadaan said the deficit is a policy choice. As long as the return on the kingdom’s investments — tourism, logistics, manufacturing, AI initiatives, and the many Vision 2030 projects — is higher than the cost of borrowing, the government is comfortable running shortfalls. Saudi debt levels remain low by global standards, below 40% of GDP, which gives them room to borrow without alarming investors.
Oil prices, meanwhile, are not doing Riyadh any favors. Brent in the low-to-mid $60s is well below what analysts estimate Saudi Arabia needs to balance the budget. Oil revenues have recovered slightly from their spring trough but are still below the five-year average. That’s why the kingdom has become one of the most active borrowers in emerging markets, raising nearly $20 billion this year in international debt.
At the same time, Saudi officials have been quietly reviewing some of the biggest Vision 2030 projects — not canceling them, but stretching timelines and trimming scope to avoid overheating the economy.
The non-oil sector now makes up more than half of real GDP, and the government expects the overall economy to grow 4.6% in 2026 and 3.7% in 2027, powered by tourism and new industrial sectors.
The message from Riyadh is the same as it’s been for years: the oil market no longer dictates the tempo. The kingdom plans to keep spending, keep borrowing, and keep pushing ahead with economic transformation even if crude prices refuse to cooperate.
By Julianne Geiger for Oilprice.com
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