Saudi Arabia approves 2025 state budget, forecasts $27bn deficit

Saudi Arabia has approved its state budget for 2025, which forecasts a fiscal deficit of SAR101bn ($27bn) or 2.3 per cent of GDP next year, as the kingdom continues to spend on massive projects under Vision 2030, the Gulf state’s ambitious plan to diversify the economy away from heavy reliance on oil revenues.

The budget estimates total expenditures of SAR1.3tn and total revenues of SAR1.2tn.

Saudi Arabia seeks to expand spending on capital projects in line with approved national strategies, national priorities, and the country’s economic diversification targets. The country’s finance minister, Mohammed Al Jadaan, said the kingdom will continue strategic spending on projects linked to Vision 2030.

“The economic transformation journey of the kingdom’s is ongoing towards diversification, innovation, and investment in promising sectors,” said Al Jadaan.

Prime Minister and Crown Prince Mohammed bin Salman affirmed that the increase in spending underscores Saudi Arabia’s commitment to foster economic growth through transformational spending while ensuring financial sustainability in the medium and long term.

Promoting sustainable economic growth, enhancing comprehensive development, and supporting essential services; several topics that reflect the impact of the budget on citizens to be discussed today through enriching sessions at #BudgetForum2025#SaudiBudget2025#ReturnsToUs pic.twitter.com/p9zX8y8NDA

— وزارة المالية السعودية (@MOFKSA) November 27, 2024

Vision 2030 aims to reduce the Saudi economy’s reliance on oil, but it requires investments worth hundreds of billions of dollars to build massive infrastructure, develop new economic sectors like tourism and manufacturing and create jobs.

However, the kingdom is reviewing spending, under which some Vision 2030 projects will be delayed or scaled back and others prioritised.

Saudi Arabia’s total public debt is projected to reach SAR1.3tn (29.9 per cent of GDP) in 2025, slightly higher than an estimated SAR1.2tn this year.

Al Jadaan reiterated that the kingdom will continue to tap international and domestic debt markets to cover the 2025 deficit and pay down debt.

Crown Prince Mohammed bin Salman emphasised the critical role of the Public Investment Fund (PIF) and National Development Fund in stabilising the economy, driving development and realising Vision 2030.

The PIF aims to reach SAR4tn in assets under management by the end of 2025 from SAR3.47tn as of October 2024.

Saudi Arabia’s economy is highly dependent on oil revenues, and the International Monetary Fund further lowered its growth outlook to 1.5 per cent in October due to the government’s policy to maintain lower oil production.

The IMF estimates growth will accelerate to 4.6 per cent next year.

Read: Moody’s upgrades Saudi Arabia’s rating on economic diversification