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Big spending and active borrowing will continue in the next fiscal year, the government’s FY2026 budget shows. Spending levels should not to be affected by volatility in oil prices, as the Kingdom wants to maintain stable plans to shore up the confidence of investors and the private sector, Finance Minister Mohammed Al Jadaan said at a briefing yesterday.
Total spending is expected to decline to SAR 1.31 tn in FY2026, compared to an estimated SAR 1.34 tn this fiscal year, according to the budget statement (pdf). Meanwhile, revenues are set to rebound to SAR 1.15 tn after falling to SAR 1.09 tn in 2025.
The biggest earmarks: Health and social development (SAR 259 bn), the military (SAR 240 bn), education (SAR 202 bn), and public security (SAR 120 bn). The government plans to maintain the high levels of spending in 2027 and 2028, but spending will shift to priority sectors like industry, logistics, AI and tourism to shore up non-oil growth.
IN CONTEXT- Vision 2030 enters its third phase in FY2026, which will focus on intensifying implementation of major projects and accelerating achievements to cement impact beyond the 2030 mark. GDP growth is penciled in at 4.6% next year, slowing to 3.7% in FY2027.
The ministry is targeting a deficit of SAR 165 bn, or 3.3% of GDP, significantly lower than the SAR 245 bn (5.3% of GDP) estimated for the current fiscal year. Deficits are expected to continue over the medium term, albeit at lower levels, as the government aims to balance between responding to economic cycles and achieving fiscal sustainability targets, the statement said.
“The current level of deficit is a policy choice. We need to invest in our economy to enable the private sector, and as long as the return on these investments is higher than the cost of the debts, we would continue that drive for the foreseeable future,” Al Jadaan said at the budget briefing.
Debt is expected to amount to SAR 1.62 tn in FY2026 (32.7% of GDP), up from an estimated SAR 1.46 tn in FY2025. “We are very careful to not oversupply the market,” Al Jadaan said, noting that only half of issuances this year happened through public markets to avoid risks and leave room for the private sector.
We could see higher levels of debt, but still below 40% of GDP, chief economist at Abu Dhabi Commercial Bank Monica Malik told Bloomberg, adding that sharp falls in oil prices remain a risk that could lead to a bigger deficit.
