Putting the 2026 Saudi Budget Under the Microscope

The Saudi Ministry of Finance has released the central government budget for 2026. The budget contains estimates of revenue, expenditure, and the fiscal deficit for 2025 and projections for 2026-28.

Fiscal Outlook

The Ministry of Finance estimates that the 2026 fiscal deficit will narrow to 165 billion riyals ($44 billion; 3.3% of gross domestic product) from 245 billion riyals ($65 billion; 5.3% of GDP) in 2025. This is based on a 5.1% increase in revenue and a 1.7% decline in spending relative to 2025. The fiscal deficit is expected to narrow further to 125 billion riyals (2.2% of GDP) by 2028.

The assumptions made on oil prices, oil production, and oil revenue are not disclosed. However, if it is assumed that oil production averages 10.1 million barrels per day in 2026 (consistent with current OPEC+ production plans) and that the dividend paid by Saudi Aramco to its shareholders increases by 5%, the assumed oil price in the budget is likely around $72 per barrel. Oil revenue would then be 4.5% higher in 2026 than in 2025. Non-oil tax revenue is budgeted to increase by 5% in 2026, which is reasonable given the growth prospects for the economy.

The projected decline in spending in 2026 is due to lower outlays on goods and services and investment projects, which more than offset higher spending on wages and salaries. Spending, however, usually exceeds the budget estimate, and while such overruns have been reduced in recent years, spending was still 4% higher than budgeted in 2025. Given this history, it is unlikely that spending will be lower in 2026 than in 2025.

In terms of financing, the budget notes that the government will use domestic and external financing through public and private channels in 2026 and will also expand its use of alternative funding sources, including project financing and export credits. Government debt is seen rising to 32.7% of GDP in 2026 from 31.7% of GDP in 2025.

Oil to Determine Budget Path

The Saudi government has made significant progress in broadening its revenue sources in recent years. Non-oil revenue now accounts for 46% of total government revenue. Nevertheless, oil revenue remains the key driver of the budget. Unfortunately, this revenue is inherently difficult to forecast because of the volatility of the global oil market and the uncertainty about Aramco’s future dividend policy.

Whether the 2026 budget numbers look reasonable largely depends on the path of the global oil market. The budget appears to take a relatively optimistic view on the oil market outlook, consistent with OPEC’s well-established position that the demand for oil remains robust. However, if oil prices were to average $65/bbl in 2026, oil revenue would be around 40 billion riyals (about $10 billion) lower than in the budget. If this were combined with a spending overrun, relative to the budget, of 4% (same as in 2025), the fiscal deficit in 2026 would be around 260 billion riyals ($69 billion; 5.2% of GDP), little changed from 2025.

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