Analysis | Read time: 10 minutes
Saudi Arabia’s Vision 2030 fiscal strategy is under its most serious stress since the program launched a decade ago. The effective closure of the Strait of Hormuz since March 2026 has blocked critical export routes for over two months, driving oil revenues lower at exactly the point the government needed them most2. Riyadh is now choosing between two paths: pare back the capital-intensive megaprojects that define Vision 2030, or deepen its position in international debt markets to fund them5.
This article examines the fiscal data, the specific project decisions, and the contrasting positions of other Gulf states, to give corporate leaders and investors a clear picture of where Saudi capital is moving and why.
Saudi Arabia’s deficit is growing faster than its budget assumed
Saudi Arabia’s public finances have been in deficit since 2022, but the numbers deteriorated sharply in 2025. The fourth quarter of 2025 produced a deficit of $25.3 billion (SAR 94.9 billion), the highest quarterly gap in five years, up from $23.6 billion in Q3 2025 and $15.3 billion in Q4 20245. For the full year, the total shortfall reached $73.6 billion (SAR 276 billion), funded entirely through debt issuance5.
The underlying pressure comes from the gap between actual oil prices and the price required to balance the budget. Brent crude averaged around $71 per barrel in late 2025. The IMF calculates that Saudi Arabia needed $92 per barrel in 2025 and requires $86.60 per barrel in 2026 to break even fiscally, against IMF projections of $66.94 and $62.38 respectively5,9.
The Hormuz closure made this gap wider in early 2026. On May 6, the Saudi Ministry of Finance reported a first-quarter deficit of SAR 125.7 billion ($33.5 billion), more than double the shortfall for the same period in 20252. Total government spending rose 20 percent year-on-year to SAR 386.7 billion. Oil revenues fell 3 percent to SAR 144.7 billion. The government had projected a deficit of SAR 65 billion for the entire year of 2026; that figure was exceeded in the first three months alone2.
Table 1: Saudi Arabia quarterly and annual fiscal outcomes (2024-2026)
| Period | Total Revenues | Total Expenditures | Fiscal Deficit | Funding Source | |
| Q4 2024 | $45.6bn (SAR 171bn) | $60.9bn (SAR 228.6bn) | $15.3bn (SAR 57.6bn) | Debt issuance5 | |
| Q3 2025 | $41.2bn (SAR 154.5bn) | $64.8bn (SAR 243bn) | $23.6bn (SAR 88.5bn) | Debt issuance5 | |
| Q4 2025 | $41.0bn (SAR 154.1bn) | $66.3bn (SAR 249bn) | $25.3bn (SAR 94.9bn) | Debt issuance5 | |
| Full Year 2025 | $294.6bn (SAR 1.105trn) | $368.2bn (SAR 1.381trn) | $73.6bn (SAR 276bn) | Debt issuance5 | |
| Q1 2026 | $69.6bn (SAR 261bn) | $103.1bn (SAR 386.7bn) | $33.5bn (SAR 125.7bn) | Debt issuance2 |
The government is borrowing, not drawing down reserves
Faced with a widening deficit, Riyadh’s clear policy preference is to issue debt rather than liquidate its central bank reserves. Fitch Ratings projects Saudi Arabia’s debt capital market will reach $600 billion by the end of 2026, driven by cross-sector financing needs and fiscal gaps11. The country ranked second globally in sukuk issuance in 2025, raising $72.5 billion, of which $38 billion came from foreign currency instruments, a 35 percent increase on 202411.
The Public Investment Fund (PIF), which manages close to $1 trillion in assets, returned to global debt markets on May 7, 2026, with a multi-tranche bond offering8. Indicative pricing was set at 130 basis points over US Treasuries for the three-year notes, 135 basis points over for the seven-year tranche, and 170 basis points over for the thirty-year bonds8. This followed a January 2026 sukuk issuance that raised $2 billion against $7 billion in orders8. In parallel, the National Debt Management Center completed roughly 90 percent of its 2026 financing target of SAR 217 billion before regional tensions escalated further8.
This borrowing strategy has protected the central bank’s balance sheet. The Saudi Arabian Monetary Authority’s (SAMA) reserve assets grew 5.3 percent in 2025 to SAR 1.73 trillion, and reached $471.8 billion by March 2026. [15][16]Foreign securities account for 58.6 percent of those reserves, with foreign deposits at 35.9 percent. This stock of foreign currency covers approximately 22 months of imports, three times the global average. [10]Fitch affirmed Saudi Arabia’s credit rating at A+ with a Stable Outlook in January 2026, reflecting these buffers.[17]
Table 2: Breakdown of SAMA reserve assets (December 2025)
| Reserve Component | Asset Value (SAR) | Share (%) | Strategic Role | |
| Investments in Foreign Securities | Exceeds 1.01 trillion | 58.6% | Liquid safe assets generating low-risk returns abroad.15 | |
| Foreign Currency and Deposits | Exceeds 619.1 billion | 35.9% | Liquid currency deposits to support the dollar peg.15 | |
| Special Drawing Rights (SDRs) | Exceeds 80.5 billion | 4.7% | International reserve assets allocated by the IMF.15 | |
| IMF Reserve Position | Exceeds 12.9 billion | 0.7% | Liquid claim on the International Monetary Fund.15 | |
| Monetary Gold | Exceeds 1.6 billion | 0.1% | Long-term store of value, unchanged since 2008.15 |
Vision 2030 projects are being resized, not abandoned
Alongside its borrowing program, the government is conducting a systematic review of capital expenditure. Finance Minister Mohammed al-Jadaan stated in late 2025 that the government would adjust, defer, or cancel projects to protect fiscal sustainability, and that spending decisions must be disconnected from institutional pride20. Al-Jadaan clarified that efficiency does not mean spending less in aggregate, but shifting capital from low-yield items to areas with higher productivity returns21.
The flagship case is NEOM. A leaked 2023 board presentation showed its projected total cost at $8.8 trillion by 2080, with Phase 1 alone requiring $370 billion by 20357. After approximately $50 billion in spending, construction on The Line was paused for a year-long review led by CEO Aiman al-Mudaifer22. The project is now being redesigned as a 5-kilometer development by 2030, compared to the original 170-kilometer concept23. The mountain resort of Trojena has also been scaled back and will no longer host the 2029 Asian Winter Games22.
The strategic pivot within NEOM is toward revenue-generating assets. The project is shifting its focus to data centers and industrial infrastructure, with the coastal location providing seawater cooling for large-scale operations23. Elsewhere, the PIF is withdrawing financial support from LIV Golf after the 2026 season, redirecting that capital to domestic technology and tourism7. Riyadh Metro, by contrast, has continued: six lines are now open, with a seventh line out for tender, a reflection of the goverment’s continued commitment to urban infrastructure with clear economic returns7.
Table 3: Vision 2030 structural project recalibrations (2025-2026)
Initiative | Original Conception | Status (May 2026) | Economic Rationale | |
| The Line (NEOM) | 170km linear city for millions | Scaled back to 5km development | Reduces capital requirements; manages technical delivery risk.23 | |
| Trojena (NEOM) | Resort hosting 2029 Asian Winter Games | Downsized; Winter Games postponed | Adjusts to fiscal limits; focuses on core buildout.23 | |
| Sindalah (NEOM) | High-end yachting resort | Opened October 2024, three years late | Cost three times its original budget.24 | |
| LIV Golf | Multi-year global golf sponsorship | PIF funding ends after 2026 | Redirects capital from soft power to domestic industries.7 | |
| Riyadh Metro | Central capital transit network | Six lines open; seventh out for tender | Essential urban infrastructure maintained.7 | |
| Energy Infrastructure | Fossil fuel power reliance | $60bn gas; $60bn renewables and grid | Provides low-cost power for domestic data centers.20 |
GCC states face the same shock but with different exposure
The fiscal pressure on Saudi Arabia is not unique in the Gulf, but the Strait of Hormuz closure has produced divergent outcomes depending on geographic position. Kuwait approved a 2026-2027 draft budget projecting a deficit of $32.1 billion (KWD 9.8 billion), with hydrocarbons accounting for 79 percent of government revenues1. Bahrain expects a deficit of $2.85 billion (BHD 1.077 billion) in 2026 and faces rising inflation from higher trading costs linked to the blockade1. Qatar projected a 2026 deficit of $6 billion (QAR 21.8 billion), using a conservative oil price assumption of $55 per barrel1. The UAE remains an exception, with a balanced federal budget and no deficit, supported by high foreign direct investment flows, though its local infrastructure remains exposed to regional security conditions1.
Oman presents the most distinctive case. Its 2026 budget projects a deficit of only $1.38 billion (OMR 530 million)1. Because Oman’s main ports sit on the Arabian Sea, entirely outside the Strait of Hormuz, its maritime trade and oil exports have continued without disruption6. With oil reaching $103 per barrel in May 2026, Oman’s current account has improved, producing a direct contrast to the Gulf states whose revenues depend on shipping through the Strait3.
Table 4: GCC regional fiscal positions and trade exposure (2026 projections)
| GCC State | Budget Balance | Deficit Value | Hormuz Exposure | Core Fiscal Strategy | |
| Saudi Arabia | Deficit | $44bn (SAR 165bn) | High (partly via Yanbu) | Foreign borrowing; capital reprioritization.1 | |
| Oman | Deficit | $1.38bn (OMR 530mn) | None (Arabian Sea ports) | Benefits from high oil prices without trade disruption.1 | |
| Bahrain | Deficit | $2.85bn (BHD 1.077bn) | High (full dependence) | Subsidy reforms; external debt markets.1 | |
| UAE | Balanced | $0 | High (offset by FDI) | Balanced federal budget; high corporate activity.1 | |
| Qatar | Deficit | $6bn (QAR 21.8bn) | High (gas via Gulf) | Conservative oil price budgeting at $55/barrel.1 | |
| Kuwait | Deficit | $32.1bn (KWD 9.8bn) | High (oil fully exposed) | Heavy hydrocarbon reliance at 79% of revenues.1 |
What this means for regional investors and project contractors
For a Gulf-based fixed-income investor or a regional infrastructure contractor, the pattern in this data is specific and actionable. Saudi sovereign and quasi-sovereign debt is expanding rapidly, it carries an A+ Fitch rating, and it is backed by foreign reserves covering 22 months of imports10,7. The PIF’s multi-tranche dollar bond in May 2026 was priced at spreads that reflect investment-grade confidence. For fixed-income desks in the UAE or Bahrain, Saudi paper now occupies a larger share of regional emerging market allocations than at any prior point in the decade8.
For contractors and developers, the revised project map changes where procurement activity will concentrate. Data center construction, industrial logistics, gas network expansion, and renewable energy grid work are all areas the government is accelerating20. Firms already holding positions in Saudi civil infrastructure, particularly metro systems and energy grids, are insulated from the megaproject cuts. Firms whose pipelines depended on NEOM’s original 170-kilometer scope face a materially smaller addressable market and should be reassessing their Saudi revenue forecasts23.
The borrowing-not-liquidating strategy also carries a specific implication for corporate treasury teams with Saudi riyal exposure. As long as SAMA maintains its reserve coverage and Riyadh services its debt without drawing down foreign deposits, the dollar peg remains stable15. That stability is not guaranteed if oil stays below $70 per barrel and the Hormuz closure extends into the second half of 2026, but the current reserve cushion provides a material buffer against short-term currency risk5.
The longer question is what Vision 2030 looks like at lower oil prices permanently
The decisions Riyadh is making now, borrowing in international markets, resizing prestige projects, and redirecting capital to industrial assets, are fiscally sensible responses to a temporary external shock. What they also reveal is that the program’s original design assumed oil prices well above their current level.
If prices stabilize below $80 per barrel after the Hormuz situation resolves, the question of which Vision 2030 components survive will require a more structural answer than project-by-project deferrals.
The direction of that answer is already visible in the data: data centers, domestic manufacturing, and energy infrastructure are the areas attracting consistent capital regardless of the fiscal cycle. The megaprojects that cannot demonstrate a near-term revenue path are the ones that will keep shrinking, whether or not oil recovers.
References
[1] War Tests Gulf’s Fiscal Safety Belt | Alhurra. https://alhurra.com/en/15782
[2] Saudi Arabia posts $33.5bn budget deficit amid drop in oil sales | Al Jazeera. https://www.aljazeera.com/economy/2026/5/6/saudi-arabia-posts-33-5bn-budget-deficit-amid-drop-in-oil-sales
[3] Middle East Daily | MUFG Research. https://www.mufgresearch.com/macro/middle-east-daily-08-may-2026/
[4] Saudi Arabia Budget Report 2026 | Argaam Plus. https://argaamplus.s3.amazonaws.com/e5356774-2477-4d2d-8f33-e9fb165446b6.pdf
[5] Saudi budget deficit hits five-year high | Salaam Gateway. https://salaamgateway.com/story/saudi-budget-deficit-hits-five-year-high-amid-oil-price-rout
[6] April 2026 Regional Economic Outlook | IMF. https://www.imf.org/-/media/files/publications/reo/mcd-cca/2026/english/text.pdf
[7] Rebalancing Ambition: Saudi Arabia’s Megaproject Pivot | Gulf International Forum. https://gulfif.org/rebalancing-ambition-saudi-arabias-megaproject-pivot/
[8] Saudi Arabia’s PIF returns to debt markets with 3-tranche bond offer | Arab News. https://www.arabnews.com/node/2642667/amp
[9] Statistical Appendix | IMF Regional Economic Outlook May 2025. https://www.imf.org/-/media/files/publications/reo/mcd-cca/2025/may/english/regional-economic-outlook-middle-east-central-asia-may-2025-statistical-appendix.pdf
[10] Saudi foreign reserves cover imports for 2 years | Arab News. https://www.arabnews.com/node/2639311/amp
[11] Fitch Ratings: Saudi Arabia’s Debt Market to Reach $600 Billion by 2026 | Maaal. https://maaal.com/en/news/details/fitch-ratings-saudi-arab/
[12] Saudi Debt Capital Market Monitor: 2026 | Fitch Ratings. https://www.fitchratings.com/research/non-bank-financial-institutions/saudi-debt-capital-market-monitor-2026-26-01-2026
[13] Saudi Arabia’s PIF moves to issue multi-tranche bonds | Funds Global MENA. https://www.fundsglobalmena.com/saudi-arabias-pif-moves-to-issue-multi-tranche-bonds-as-funding-needs-rise/
[14] Saudi wealth fund PIF 10-year Islamic bonds attract $7bn orders | Fidelity Fixed Income. https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202601210315RTRSNEWSCOMBINED_L6N3YM0EL_1
[15] SAMA Reserve Assets Exceed SAR 1.7 Trillion by End of 2025 | Maaal. https://maaal.com/en/news/details/sama-reserve-assets-excee/
[16] Saudi Arabia Foreign Exchange Reserves 2001-2026 | CEIC Data. https://www.ceicdata.com/en/indicator/saudi-arabia/foreign-exchange-reserves
[17] Fitch Affirms Saudi Arabia at A+; Outlook Stable | Fitch Ratings. https://www.fitchratings.com/research/sovereigns/fitch-affirms-saudi-arabia-at-a-outlook-stable-16-01-2026
[18] Fitch Affirmed Saudi Arabia’s credit rating at A+; Stable Outlook | Saudi Ministry of Finance. https://www.mof.gov.sa/en/MediaCenter/news/Pages/News_17122026.aspx
[19] Saudi foreign reserve assets drop to SAR 1.72T in December | Argaam. https://www.argaam.com/en/article/articledetail/id/1872248
[20] Al-Jadaan: No room for ego as Saudi giga projects face reassessment | Saudi Gazette. https://saudigazette.com.sa/article/655749/SAUDI-ARABIA/Al-Jadaan-Saudi-Arabia-to-recalibrate-projects-double-down-on-industry-tourism-and-AI
[21] Saudi Arabia not afraid to cancel costly Vision 2030 projects | Gulf Times. https://www.gulf-times.com/article/716342/business/saudi-arabia-not-afraid-to-cancel-costly-vision-2030-projects-says-minister
[22] Saudi Arabia to scale back flagship NEOM project | The New Arab. https://www.newarab.com/news/saudi-arabia-scale-back-flagship-neom-project-report
[23] Saudi Arabia to drastically scale back NEOM megaproject | Middle East Monitor. https://www.middleeastmonitor.com/20260126-saudi-arabia-to-drastically-scale-back-neom-megaproject-amid-mounting-costs-and-failures/
[24] Saudi Arabia Scales Back Neom Megacity Amid Delays and Costs | Grand Pinnacle Tribune. https://evrimagaci.org/gpt/saudi-arabia-scales-back-neom-megacity-amid-delays-and-costs-525560
[25] Neom Mega-Project Scaled Back, Shifts Focus to Data Centers | IndexBox. https://www.indexbox.io/blog/neom-mega-project-scaled-back-shifts-focus-to-data-centers/
[26] Disappearing Gulf Capital: The Iran War Risk Wall Street Isn’t Watching | CFR. https://www.cfr.org/articles/disappearing-gulf-capital-the-iran-war-risk-wall-street-isnt-watching
