Saudi Arabia's Budget Deficit Triples Amid Vision 2030 Spending

Saudi Arabia's budget deficit surged to 15.3 billion riyals in Q2, driven by increased spending aligned with Vision 2030 ambitions. Despite 12% revenue growth, a 15% spending rise led the deficit to triple. Key economic indicators and international forecasts underscore the fiscal challenges ahead for the kingdom.

Saudi Arabia's budget deficit swelled to 15.3 billion riyals ($4.09 billion) in the second quarter, finance ministry data revealed on Wednesday. This marks almost triple the shortfall recorded a year earlier, highlighting the strain of increased state spending.

While overall revenue rose by 12% to 353.6 billion riyals in the quarter, spending grew by 15% to nearly 369 billion riyals. Despite an 18% rise in oil revenue to 213 billion riyals, and a 4% increase in non-oil revenue, the ambitious Vision 2030 agenda continues to exert pressure on the kingdom's finances.

Subsidies surged by 68% and capital expenditures nearly doubled year-on-year. By mid-year, the budget deficit reached 27.7 billion riyals, with the government projecting a 79-billion-riyal deficit for the entire year. According to the International Monetary Fund, Saudi Arabia needs oil prices at $96.2 per barrel to balance its 2024 budget.

Saudi Arabia has raised $17 billion from public debt markets this year to finance its fiscal needs. Its total public debt rose to 1.149 trillion riyals by the end of June, compared to 1.05 trillion riyals at the close of the previous year. Both Aramco and the sovereign wealth fund PIF have issued bonds to secure additional funding for Vision 2030 projects.