Saudi Arabia Sets Borrowing Path For 2026

(MENAFN- The Arabian Post)

Saudi Arabia has approved a borrowing plan for 2026 that signals continued reliance on debt markets to fund fiscal gaps while maintaining momentum on economic diversification, according to an announcement from the finance ministry. The plan sets total financing needs at about 217 billion riyals, equivalent to roughly $57.9 billion, reflecting a combination of deficit funding and scheduled debt repayments due during the year.

The approval, signed off by Finance Minister Mohammed Al-Jadaan, outlines a framework intended to cover a projected budget shortfall of around $44 billion for the 2026 fiscal year. The remaining portion, estimated at close to $13.9 billion, is earmarked for repayment of principal on existing obligations that mature in 2026. Officials said the structure aims to balance fiscal sustainability with the need to preserve investment momentum.

The borrowing envelope comes as the kingdom presses ahead with diversification plans under Vision 2030, which seek to reduce dependence on hydrocarbons by expanding non-oil sectors such as tourism, logistics, mining and advanced manufacturing. Large-scale projects, infrastructure spending and social reforms remain central to this agenda, requiring significant capital even as the government manages budget discipline.

Saudi Arabia has built a track record of tapping both domestic and international markets over the past decade, issuing conventional bonds and sukuk across multiple maturities. The finance ministry has previously emphasised flexibility in its funding mix, allowing authorities to respond to market conditions, interest-rate cycles and investor appetite. Analysts note that maintaining a predictable issuance calendar has helped deepen the local debt market while keeping international investors engaged.

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The size of the 2026 financing requirement reflects several intersecting pressures. Oil revenues, while still substantial, have been influenced by global price volatility and production management policies. At the same time, public spending has remained elevated to support economic transformation, social programmes and capital-intensive developments. The government has sought to smooth these dynamics by spreading borrowing over time rather than relying on abrupt fiscal tightening.

Officials have indicated that the kingdom's debt-to-GDP ratio remains within levels considered manageable by international standards. Saudi Arabia entered the decade with comparatively low public debt, giving it room to borrow as diversification spending accelerated. Even so, authorities have reiterated commitments to medium-term fiscal frameworks designed to prevent unchecked debt accumulation.

Market participants are expected to watch closely how the 2026 plan translates into issuance strategy. The government may continue to alternate between riyal-denominated instruments aimed at domestic banks and funds, and foreign-currency offerings that broaden the investor base. Previous transactions have attracted strong demand, supported by the kingdom's sovereign credit profile and sizeable foreign reserves.

The borrowing plan also aligns with the broader role of state-linked entities in financing development. While the central government manages its own debt, institutions such as the Public Investment Fund play a parallel role by raising capital to back strategic projects. Coordination between fiscal policy and these entities has become increasingly important in shaping overall public-sector leverage.

Economists say clarity around borrowing needs helps reduce uncertainty for investors and rating agencies, particularly as global financial conditions evolve. Interest rates in major economies have shown periods of fluctuation, affecting borrowing costs worldwide. By signalling its expected needs well in advance, Saudi Arabia can adjust timing and instruments to mitigate refinancing risk.

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The 2026 plan underscores the kingdom's approach of using debt as a tool to bridge fiscal gaps while pursuing long-term structural change. Non-oil revenue measures, including fees, taxes and returns from state investments, have grown over time, but officials acknowledge that diversification is a multi-year process. Borrowing, they argue, provides continuity for reforms without abrupt spending cuts that could slow growth.

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