By Yousef Saba
DUBAI (Reuters) – Saudi Arabia, with its wealth linked inextricably to oil revenue, faces mounting pressure to raise debt or cut spending after a plunge in crude prices, complicating plans to fund an ambitious agenda to diversify its economy.
Oil prices have tumbled to near four-year lows on fears a trade war will hit global growth and after a surprise decision by some OPEC+ oil producers, including Saudi Arabia, to boost their output plans.
The price decline threatens to erase tens of billions of dollars of Saudi revenue, along with a planned drop in dividends from state-controlled energy giant Saudi Aramco.
The International Monetary Fund and economists estimate Riyadh needs oil prices of over $90 a barrel to balance its budget. Benchmark Brent prices slipped below $65 this week.
VISION 2030While Saudi Arabia funds its Vision 2030 reform program off budget, the government needs to spend on mammoth infrastructure projects linked to the program, which aims to wean the economy off its self-declared “oil addiction.”
The $925 billion Public Investment Fund, which is steering Vision 2030, also partly relies on oil, including through its shares in Aramco.
“Saudi Arabia is likely to rely on debt financing, and it will have to delay or scale back some planned contracting awards given 2024 was already in a twin deficit,” said Karen Young, senior research scholar at Columbia University’s Center on Global Energy Policy, referring to fiscal and current account deficits.
Before the U.S. tariffs announcement, she said analysts had expected Saudi public debt to surge by $100 billion in the next three years. It jumped 16% to over $324 billion in 2024, official figures show.
Aramco’s dividends are also expected to fall by a third this year, meaning the government and PIF will receive about $32 billion and $6 billion less, respectively, Reuters calculations show.Oil generated 62% of government revenue last year. Riyadh has not forecast oil revenue this year but in its 2025 budget released in November, it projected a 3.7% fall in total revenue.
RECALIBRATINGPIF is also likely to seek additional financing, analysts said. The fund’s Governor Yasir Al-Rumayyan said last year it intends to boost annual investments to $70 billion between 2025 and 2030 from $40-50 billion.
PIF declined to comment.
Saudi Arabia was among the largest emerging market debt issuers last year and the government has already raised $14.4 billion in bonds this year.
PIF, which borrowed $24.8 billion last year via bonds and loans, has already raised $11 billion in 2025. Several other state-linked entities have also raised billions.
