Saudi Arabia's Rising Debt Dependency in a Low-Oil-Price Era: Assessing the Financial Sustainability of Vision 2030

Saudi Arabia’s Vision 2030, a bold blueprint to diversify its economy away from oil, has entered a critical phase as the kingdom navigates the dual pressures of low oil prices and rising fiscal and corporate borrowing. While the initiative has spurred transformative investments in infrastructure, technology, and private-sector growth, the financial sustainability of this ambitious agenda is now under scrutiny. With public debt rising to 26.2% of GDP in 2024 and projected to reach 46% by 2030 [1], the kingdom faces a delicate balancing act: maintaining economic momentum while avoiding a debt overhang that could undermine long-term stability.

Fiscal Challenges and the Oil Price Conundrum

The fiscal deficit, a key indicator of financial strain, narrowed to $9.21 billion in Q2 2025, a 41.1% decline from the previous quarter, driven by higher oil and non-oil revenues [2]. However, this improvement masks deeper vulnerabilities. Oil prices, which fell to four-year lows in 2025, have eroded government revenue, forcing the kingdom to rely heavily on borrowing. The IMF estimates that Saudi Arabia’s fiscal deficit will peak at 4% of GDP in 2025 before gradually narrowing to 3.2% by 2030 [3]. This trajectory assumes oil prices stabilize above $96 per barrel—a threshold necessary for budget balance [4]. If prices remain depressed, the deficit could widen, exacerbating debt accumulation.

The Public Investment Fund (PIF), a cornerstone of Vision 2030, has also turned to debt to fund its ambitious projects. In 2025 alone, the PIF raised $11 billion through bond and sukuk issuances [5], reflecting a shift toward external financing as oil revenues decline. While Saudi Arabia’s foreign reserves ($459 billion as of May 2025) and strong credit ratings provide a buffer, prolonged fiscal stress could test these cushions.

Corporate Borrowing and Market Dynamics

The corporate sector has mirrored the government’s reliance on debt. Saudi Arabia led the GCC in primary debt market activity in H1 2025, raising $47.93 billion through 71 bond and sukuk issuances [6]. This surge, driven by Vision 2030-linked projects, has expanded the domestic debt market, with total outstanding debt surpassing $1 trillion in the GCC by late 2024 [6]. However, the shift from sukuk to conventional bonds—a trend observed in 2025—signals growing investor caution. S&P Global notes that foreign participation in Saudi debt remains limited, with non-resident holdings under 2% of outstanding issuance [7], raising concerns about liquidity risks.

The financial sector dominates this activity, accounting for 43.6% of total debt raised in H1 2025 [6]. While this reflects confidence in the sector’s resilience, it also highlights a concentration risk. Non-financial state-owned entities and private companies, which account for 35% of issuance, are increasingly exposed to interest rate hikes and tighter credit conditions [7]. Kamco Invest projects that Saudi Arabia will face $168 billion in bond maturities from 2025 to 2029 [8], underscoring the need for robust refinancing strategies.

The Path Forward: Balancing Ambition and Prudence

Saudi Arabia’s ability to sustain Vision 2030 hinges on three factors: fiscal discipline, structural reforms, and external conditions. The IMF has praised the kingdom’s progress in improving the non-oil primary deficit, which fell by 0.6 percentage points of GDP in 2024 [2], but warns that spending overruns could reverse this trend. Regulatory reforms, such as the 2024 investment law and the Financial Sector Development Program, aim to deepen market liquidity and attract foreign capital [9]. However, these measures must be paired with prudent fiscal management to avoid crowding out private-sector credit—a risk highlighted by rising domestic interest rates [3].

The geopolitical landscape further complicates the outlook. Geopolitical tensions, particularly between Israel and Iran, have introduced volatility into oil markets, while OPEC+ production cuts have temporarily reduced revenue [10]. These uncertainties necessitate a flexible fiscal strategy, as evidenced by the government’s willingness to adjust spending and borrowing plans in response to oil price fluctuations [11].

Conclusion

Saudi Arabia’s debt dependency in a low-oil-price era is a double-edged sword. While borrowing has enabled Vision 2030’s progress, it also exposes the kingdom to financial risks that could derail its transformation. The key lies in aligning fiscal and corporate debt strategies with structural reforms to enhance resilience. For investors, the challenge is to assess whether Saudi Arabia can maintain its economic momentum without compromising long-term stability—a question that will define the success of Vision 2030 in the years ahead.

Source:
[1] Saudi Arabia: Concluding Statement of the 2025 Article IV Mission [https://www.imf.org/en/News/Articles/2025/06/25/saudi-arabia-concluding-statement-of-the-2025-article-iv-mission]
[2] Saudi Arabia’s budget deficit shrinks to $9.21 billion as oil, other revenues rise [https://www.reuters.com/world/middle-east/saudi-budget-deficit-shrinks-921-billion-oil-other-revenues-rise-2025-07-31/]
[3] Debt reckoning on the horizon for Saudi Arabia [https://www.agbi.com/analysis/economy/2025/07/debt-reckoning-on-the-horizon-for-saudi-arabia/]
[4] Saudi Arabia: A Shelter from the Debt Storm? [https://www.ssga.com/es/en_gb/intermediary/insights/weekly-etf-brief-27-05-2025]
[5] Saudi Arabia leads emerging markets in dollar debt [https://www.arabnews.com/node/2612312/business-economy]
[6] Saudi Arabia tops GCC debt market with $47.9bn in H1 [https://www.arabnews.com/node/2610616/business-economy]
[7] Saudi Arabia's Corporate Bond and Sukuk Markets Gain Momentum Amid Vision 2030 Push [https://khaleejmag.com/business/saudi-arabias-corporate-bond-and-sukuk-markets-gain-momentum-amid-vision-2030-push/]
[8] Debt maturities and refinancing risks in the GCC [https://www.arabnews.com/node/2610616/business-economy]
[9] Saudi debt markets set to expand further on Vision 2030 [https://www.arabnews.com/node/2606531/business-economy]
[10] How the oil price plunge complicates Saudi Arabia's economic agenda [https://energynow.com/2025/04/how-the-oil-price-plunge-complicates-saudi-arabias-economic-agenda/]
[11] Saudi Arabia signals it can live with lower oil prices [https://www.reuters.com/business/energy/saudi-arabia-signals-it-can-live-with-lower-oil-prices-sources-say-2025-04-30/]