Saudi Arabia Sticking to Spending, Borrowing Plans

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00:00Christine, yeah, we've got the budget now. What were your key takeaways from it?

00:06Well, I think the one thing that was very clear was the intention by the Saudi government to

00:11continue plowing ahead with its Vision 2030 diversification agenda, even in the face of

00:18the persistent challenge of low oil prices that are translating into lower oil export revenues.

00:23When we look at the numbers, the government has said that it plans to continue spending around

00:271.3 trillion SAR over the next couple of years. While we are only due to see revenues start to

00:34recover ever so slightly after dipping this year, oil export revenues reached the lowest level since

00:402021 in May of this year. This will lead over the years ahead to a budget deficit expectation of

00:463.3% in 2026. And then we are due to see the deficit come down a little bit to lovers closer to 2% in

00:53the years following. Now, it does need to be said that this is a significant improvement from 2025.

00:59We are expected this year to see the budget deficit blow out to more than 5% of GDP. But when we spoke

01:05to the finance minister, Mohamed El-Jadan earlier in the week, he made very, very clear that the

01:11government is making a policy choice here to continue on with these level of deficits, to

01:16continue with higher spending, even in the face of lower oil revenues, because it really wants to

01:21continue investing in the economy in order to see more diversification happening, to bring in more

01:28private sector investment, and ultimately to drive the Vision 2030 agenda. No matter what the cost

01:34really may be here, I mean, it seems they are just very committed.

01:39Yeah, it's interesting, as you said, those borrowing plans and borrowing to plug that fiscal gap is their

01:46choice. But what about that broader scrutiny you see then on Crown Prince, MBS's ambitious economic

01:53transformation, and the rationalization we see around this spending as well?

01:59Well, it was really clear in the budget statement yesterday that the government is going to be

02:04focusing more heavily going forward on making its spending more efficient. We also heard from the

02:11finance minister on this topic specifically, what he had to say was that the government has carried out

02:16an exercise over the last couple of years where it has gone to all the various project operators and

02:21industries within the Saudi government and those that are driving the Vision 2030 agenda, and all of

02:26them have recalibrated their budgets, kind of narrowed their focus to be more in line with what they can

02:32deliver. The finance minister has now said that the Saudis stand ready to either accelerate projects,

02:38to defer them, or to even outright cancel them if they don't make sense or are not in line with the

02:44Vision 2030 strategy. And really, this goes a step beyond what we have heard from the finance minister

02:49over the last year, in a sense that he's really saying here, look, there's no ego. We will cancel

02:55projects if it doesn't make sense anymore. He also highlighted that the PIF is undergoing its own

03:01reprioritization strategy at the moment, and that we will hear from the Sovereign Wealth Fund in the

03:06months ahead about how that reprioritization will factor into its investments going into 2026.