Analysis-How the oil price plunge complicates Saudi Arabia's economic agenda

Yousef Saba

Tue, Apr 8, 2025, 2:47 AM 4 min read

By Yousef Saba

DUBAI (Reuters) - Saudi Arabia, with its wealthiness linked inextricably to lipid revenue, faces mounting unit to rise indebtedness oregon chopped spending aft a plunge successful crude prices, complicating plans to money an ambitious docket to diversify its economy.

Oil prices person tumbled to adjacent four-year lows connected fears a commercialized warfare volition deed planetary maturation and aft a astonishment determination by immoderate OPEC+ lipid producers, including Saudi Arabia, to boost their output plans.

The terms diminution threatens to erase tens of billions of dollars of Saudi revenue, on with a planned driblet successful dividends from state-controlled vigor elephantine Saudi Aramco.

The International Monetary Fund and economists estimation Riyadh needs lipid prices of implicit $90 a tube to equilibrium its budget. Benchmark Brent prices slipped beneath $65 this week.

VISION 2030While Saudi Arabia funds its Vision 2030 betterment programme disconnected budget, the authorities needs to walk connected mammoth infrastructure projects linked to the program, which aims to wean the system disconnected its self-declared "oil addiction."

The $925 cardinal Public Investment Fund, which is steering Vision 2030, besides partially relies connected oil, including done its shares successful Aramco.

"Saudi Arabia is apt to trust connected indebtedness financing, and it volition person to hold oregon standard backmost immoderate planned contracting awards fixed 2024 was already successful a duplicate deficit," said Karen Young, elder probe student astatine Columbia University's Center connected Global Energy Policy, referring to fiscal and existent relationship deficits.

Before the U.S. tariffs announcement, she said analysts had expected Saudi nationalist indebtedness to surge by $100 cardinal successful the adjacent 3 years. It jumped 16% to implicit $324 cardinal successful 2024, authoritative figures show.

Aramco's dividends are besides expected to autumn by a 3rd this year, meaning the authorities and PIF volition person astir $32 cardinal and $6 cardinal less, respectively, Reuters calculations show.Oil generated 62% of authorities gross past year. Riyadh has not forecast lipid gross this twelvemonth but successful its 2025 fund released successful November, it projected a 3.7% autumn successful full revenue.

RECALIBRATINGPIF is besides apt to question further financing, analysts said. The fund's Governor Yasir Al-Rumayyan said past twelvemonth it intends to boost yearly investments to $70 cardinal betwixt 2025 and 2030 from $40-50 billion.

PIF declined to comment.

Saudi Arabia was among the largest emerging marketplace indebtedness issuers past twelvemonth and the authorities has already raised $14.4 cardinal successful bonds this year.

PIF, which borrowed $24.8 cardinal past twelvemonth via bonds and loans, has already raised $11 cardinal successful 2025. Several different state-linked entities person besides raised billions.