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As Saudi Arabia pushes ahead with its ambitious Vision 2030 plan to build huge futuristic cities and resorts, the world’s top crude oil exporter will need to borrow more money on the debt markets as oil prices continue to linger at levels of about $20 per barrel lower than the Saudi fiscal breakeven oil price.
The Kingdom, the leader and main architect of the OPEC+ production cuts, is starting to ease a small part of these cuts on April 1, per the group’s latest plan to add 138,000 barrels per day (bpd) to supply this month.
Rising OPEC+ output this year could weigh down on oil prices, which have been hovering in the low $70s per barrel in recent weeks. That’s well below the $91 per barrel that the International Monetary Fund (IMF) thinks is the oil price needed to balance Saudi Arabia’s budget.
With many uncertainties about global trade and economic and oil demand growth, the Kingdom may have to endure a prolonged period of lower-than-breakeven prices and raise its public debt. Borrowing will have to increase to cover planned expenditures, or spending on some mega projects and Vision 2030 programs could be delayed or reduced, analysts say.
Moreover, Saudi Arabia’s main cash cow, oil giant Aramco, has just slashed its dividend, which further dents income for the Kingdom, the company’s main shareholder.
In its 2025 Budget Statement, Saudi Arabia expects total expenditures of $342 billion (1.285 trillion Saudi riyals) as it continues to invest in projects to diversify the economy away from oil revenues, which account for about 61% of total Saudi government revenue.
Revenues are projected to be lower than expenditures, at $316 billion (1.184 trillion riyals). These estimates indicate a deficit of $27 billion (101 billion riyals), which represents about 2.3% of Gross Domestic Product (GDP).
“The Government will continue funding and supporting the implementation of programs, initiatives, and economic transformation projects in line with Saudi Vision 2030, while maintaining spending efficiency and fiscal sustainability over the medium- and long-term,” the Ministry of Finance said in November.
source: oilprice.com
