Budget deficit widens to five-year high in 4Q 2025

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WHAT WE’RE TRACKING TODAY

Etihad Salam getting closer to IPO?

Good morning, friends. We have a pretty busy morning as we hit the midpoint of this shortened workweek.

The budget deficit leads today’s issue after the Finance Ministry’s quarterly budget performance report showed that it widened to its highest level in five years.

WEATHER- Blowing dust and patchy showers: Active winds will raise dust across Makkah, Madinah, Tabuk, and Hail, extending into Qassim, Riyadh, and the Eastern Province. Meanwhile, light rain is expected over the western and southwestern highlands, with a chance of overnight and early morning fog in those areas, as well as parts of the Northern Borders and Al Jouf.

Riyadh: 29°C high / 13°C low;
Jeddah: 32°C high / 21°C low;
Makkah: 32°C high / 22°C low;
Dammam: 31°C high / 15°C low.

Watch this space

IPO — More companies are pressing ahead with listing plans: Telecom operator Etihad Salam is the latest name to enter Tadawul’s IPO pipeline, tapping BSF Capital to quarterback a potential main market float, Bloomberg reports, citing sources it says are in the know. Founded in 2005, Salam — formerly Integrated Telecom Company — runs a roughly 17k-km fiber network across the Kingdom and sits under the Mawarid Group umbrella, which also includes American Express KSA and OSN (via Panther Media Group) in its portfolio.

Two industrial names are also getting closer: Alkhorayef Petroleum reportedly tapped Citi, JPMorgan, and BSF Capital to quarterback its long-telegraphed IPO. The PIF-backed oil and gas services company is said to have been courting banks for a Tadawul listing since late last year. Steel pipe maker ArcelorMittal Jubail, another PIF-backed player, is reportedly working with Moelis and looking to tap more banks for its potential IPO, which was first announced last month.

Still eyeing a float: Local contractor Mutlaq AlGhowairi — which was said to be mulling a 2026 IPO earlier last year — continues to explore a share sale that could value it at SAR 12-15 bn with no material update on timing or mandates, according to the business news service.

Why it matters: Issuers could be seeing a reopening window as Tadawul still lacks a marquee listing so far in 2026, and many recent IPOs are trading under their debut level. Whether investors agree and at what price will determine if this is a pipeline revival or just preparatory positioning.

ENERGY — Aramco tests appetite for Jafurah on the global condensate table: Aramco reportedly sold several ultra-light crude oil cargoes from the USD 100 bn Jafurah gas project to US majors and an Indian refiner ahead of its first export later this month, Reuters reports, citing trade sources. Pricing landed at premiums of USD 2-3 / bbl to Dubai on an FOB basis.

Asia-bound: The buyers include Chevron, Exxon, and Indian Oil Corporation (IOC). Two cargoes for Chevron will load later this month and in March, with Exxon and IOC also lifting next month, according to the newswire. Chevron’s first cargo is likely headed to its South Korean joint-venture refiner GS Caltex, with the second potentially bound to Thailand for Star Petroleum Refining, two sources told Reuters.

We got an early taste of the news: Reports surfaced earlier this month that Aramco started selling condensates from Jafurah, with Asian buyers due to receive shipments late this month or early next month. Production at the gas plant — the largest liquid-rich shale gas field in the Middle East — started late last year. The first phase came online with 450 mmcf/d of capacity, and the project is expected to reach full capacity at 2 bcf/d by 2030.

SOUND SMART- Shale-style gas fields like Jafurah produce condensate alongside gas — the liquid hydrocarbon that drops out of gas once pressure falls. Condensate isn’t technically crude, but it trades like it (priced against oil benchmarks) and runs through refineries. Condensate is the first monetizable output from Jafurah, long before the gas system fully ramps.

Data point

SAR 1.78 tn — that’s Saudi Arabia’s foreign reserve assets by the end of January, a six-year high, Al eqtisadiah reports, citing Saudi Central Bank data. This is the highest level since the pre-pandemic era, marking a significant recovery from the 2020 lows when the government withdrew SAR 200 bn over three months — SAR 150 bn of which was transferred to the PIF for global market plays.

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The big story abroad

The massive tech selloff is once again making waves in the global press. IBM is the latest victim of the AI scare, ending yesterday down 13.2% — its most drastic dip in 25 years — after Anthropic claimed its Claude Code offering could automate much of the work done by solutions currently provided by the tech giant.

The “sell first and ask questions later” trend was exacerbated in part by a bearish report from an obscure firm called Citrini Research, whose hypothetical scenario predicted a serious threat posed by AI advancement to food delivery services and credit card companies. Other disconcerting predictions made by the report included mass unemployment for white-collar workers.

Keeping investors spooked are comments made by Franklin Templeton Investments CEO Jenny Johnson, who told the Financial Times, “you really have to question if enterprise software companies can thrive” in light of new AI models.

CLOSER TO HOME- Stablecoin for Gaza? The Gaza Board of Peace is looking to roll out a stablecoin in Gaza, allowing Palestinians in the strip to transact digitally, the Financial Times reports, citing five people it says are familiar with the discussions. The proposed currency is expected to be pegged to the USD and will not become a new Palestinian currency, the sources said.

Budget deficit widens to five-year high in 4Q 2025

Saudi Arabia’s budget deficit widened to SAR 94.8 bn in 4Q 2025, the highest level in over five years, according to the Finance Ministry’s quarterly budget performance report (pdf). The figure pushes the full-year deficit to SAR 276.6 bn — more than double the initially projected SAR 101 bn and 13% higher than the most recent official projections. This was driven by a 12% decline in annual revenues to SAR 1.11 tn, as oil receipts plunged.

In 4Q, the deficit was driven by a 9% y-o-y drop in revenues to SAR 276.7 bn. Expenditures ticked up 3% y-o-y to SAR 371.5 bn.

The breakdown

Oil revenue dropped 10% y-o-y to SAR 154.2 bn in 4Q 2025. Meanwhile, the diversification engine stalled, with non-oil revenue contracting 7% y-o-y to SAR 122.6 bn.

Total expenditure on non-financial assets (capex) saw a late-year rush, jumping 18% y-o-y to SAR 50.9 bn during the quarter. However, the cost of servicing the Kingdom’s debt accelerated sharply, with financing expenses jumping 27% y-o-y to SAR 14.9 bn.

On a full-year basis, oil receipts dropped 20% y-o-y to SAR 606.5 bn, while non-oil revenue growth slowed to 1% y-o-y, closing 2025 at SAR 505.2 bn. Full-year capex shrank 12% to SAR 168.5 bn — pointing to strict capital rationalization — while total annual financing expenses jumped 22% to SAR 54.4 bn.

A debt binge protects reserves: Government reserves were untouched to plug the gap, leaving them intact at SAR 399 bn by year’s end. The entire full-year shortfall was financed through borrowing, sending total public debt to SAR 1.51 tn.

The trend could continue this year: “If spending misses the budget by a similar amount in 2026, then the deficit is likely to be even higher than the 5.8% of GDP in 2025, driving debt up further,” Gulf analyst at GlobalSource Partners Justin Alexander tells EnterpriseAM.

Acwa powers up Turkey with 5 GW solar push

Acwa is banking big on the Anatolian sun after signing key terms for Turkey’s 5 GW renewable energy investment agreement with the country’s Energy Ministry, according to a press release. The agreement kicks off with a 2 GW solar phase across two plants in Sivas and Taşeli.

The structure is a two-pronged commitment: The investment agreement key terms will see Acwa develop, finance, construct, commission, and operate the facilities, while a separate power purchase agreement with state utility EÜAŞ secures the offtake.

Who’s paying? The projects will be funded using external sources, with loans provided by international financial institutions, Turkey’s Energy Minister Alparslan Bayraktar said earlier this month.

Acwa wants to lock in phase two at Cop31, Chairman Mohammad Abunayyan said earlier this week, covering 3 GW of solar, wind, and storage. Total investment across the full 5 GW is expected to reach USD 5 bn.

The project timeline: Financial close is set for 2027, with electricity expected to hit the grid by early 2028. While the first phase is solar-heavy, the upcoming 3 GW phase will include a mix of solar, wind, and storage.

The new pipeline builds on its earlier Turkish investment — the 927 MW Kırıkkale IPP commissioned in 2017, a USD 930 mn asset that cuts roughly 1.8 mn tons of CO2 emissions annually.

Saudi introduces carve-outs to RHQ mandate

The Kingdom is allowing limited exemptions to its ban on government contracts with foreign firms without a regional headquarters (RHQ), Asharq Al Awsat reports. The Local Content and Government Procurement Authority embedded the process into the Etimad platform, allowing exceptions for projects needing highly specialized technical expertise or when a non-RHQ bidder offers significantly lower pricing.

How it works

The exemption workflow: Government entities can’t apply retroactively — they must seek approval through the Etimad platform before launching a tender or starting direct negotiations. Requests may apply to a single project, a portfolio of projects, or a set timeframe. Tenders issued before the platform went live — or outside it — will continue under the old process.

Criteria for non-RHQ bidding: The default preference remains for companies with a Saudi-based RHQ. However, non-RHQ bidders can still secure contracts if they are the only technically compliant offer, or if they rank among the strongest technically and undercut the next-best bid by at least 25%. Smaller contracts valued at SAR 1 mn or less are automatically exempt, pending ministerial oversight.

Why it matters

Saudi Arabia is signaling flexibility in enforcing its RHQ mandate to avoid delaying strategic projects. Shifting the exemption process to Etimad suggests the government is balancing policy objectives with execution needs, particularly for projects requiring specialized global expertise not yet based in the Kingdom.

IN CONTEXT- The RHQ mandate, effective since 2024, was a “join us or lose us” ultimatum for global firms, requiring that they either relocate or forgo government contracts. While it has drawn in more than 700 companies, surpassing the 2030 target, the scale and technical demands of the 2026 project pipeline — spanning AI, specialized technologies, and Expo 2030 preparations — mean some required vendors may not yet have a full Saudi footprint.

Marafiq reaches financial close on SAR 1.9 bn wastewater plant in Jubail 2

Jubail waste plant secures funding: The Power and Water Utility Company for Jubail and Yanbu (Marafiq) reached financial close on the USD 500 mn (SAR 1.9 bn) Amiral industrial wastewater treatment and reuse project in Jubail Industrial City 2, according to a Tadawul disclosure. The financing package was secured through a consortium of lenders including First Abu Dhabi Bank, Abu Dhabi Commercial Bank, Korea Development Bank, and Qatar National Bank.

Ownership breakdown: The project sits under Aqua Renew Company, an SPV owned by Marafiq (40%), Veolia Middle East (35%), and Lamar Arabia for Energy (25%). The SPV was established following a 30-year concession agreement with Saudi Aramco Refining and Petrochemical Company (Satorp), an Aramco-TotalEnergies joint venture.

Execution is already spoken for: In September last year, France’s Veolia and Egypt’s Orascom secured the civil works and a 30-year O&M contract, with operations to begin in 2028.

About the facility: The facility will use advanced treatment and recovery technologies to process industrial effluents, including spent caustic streams, and convert them into demineralized water for reuse at the Amiral petrochemical complex, which Satorp is developing.

Bank AlJazira returns to debt market, Saudi joins global AI partnership

Bank AlJazira returns to debt market

Bank AlJazira is tapping the local debt market to shore up its capital base, announcing its intention to issue SAR-denominated additional tier 1 (AT1) sukuk via private placement, it said in a bourse filing. The Tadawul-listed lender appointed AlJazira Capital and Al Rajhi Capital to quarterback the offering under its SAR 5 bn program.

REFRESHER- AlJazira’s last AT1 issuance saw it raise USD 500 mn under its USD 1.5 bn program back in September 2025, pricing the perpetual, five-year, non-call notes at a 6.50% yield and listing them in London.

Saudi joins global AI partnership

Saudi Arabia joined the Global Partnership for Artificial Intelligence (GPAI), a G7 initiative hosted by the OECD, state news agency SPA reports. Represented by the Saudi Data and Artificial Intelligence Authority, the Kingdom became the first Arab nation to join the 46-member partnership, allowing it to take part in international discussions on AI standards, governance, and policy.

Why it matters: This is a signal to investors that the Kingdom is aligning its AI governance — safety, ethics, and data — with G7 standards. The membership is expected to boost the global tech community’s confidence in the Kingdom’s regulatory environment and attract investors, major tech companies, and entrepreneurs.

Under-construction data centers tap ratings to fund AI buildup

The AI arms race is rapidly spilling into credit markets, as data center developers are now seeking credit ratings for projects still under construction — a sign of how urgently the tech sector needs capital to fund its multi-hundred-bn USD infrastructure expansion, the Financial Times reports. Back in 2021, tech giants self-funded roughly 80% of their data center development using their strong balance sheets. Now, however, 60% of developments involve third-party institutional capital.

To unlock these massive pools of capital, developers are rushing to secure investment-grade stamps of approval from agencies like S&P, Moody’s, Fitch, and KBRA. “It’s astronomical growth,” Fitch’s Roelof Steenekamp told the salmon-colored paper. Fitch alone evaluated over 35 private data center agreements in just nine months, averaging USD 3 bn per transaction, with the vast majority being newly constructed, hyperscaler-backed facilities. Moody’s and Fitch have also privately assigned investment-grade ratings to tens of bns of USD in loans tied to projects backed by Oracle Corporation. KBRA currently rates nearly USD 100 bn in data center debt and expects the figure to rise to up to USD 150 bn by mid-year.

Lenders are utilizing “credit tenant lease financing,” which essentially caps the project’s credit risk at the rating of its anchor tenant. For instance, S&P handed an A+ rating to USD 27 bn in debt for Meta’s Hyperion data center in Louisiana. To get the agreement done, Meta provided financial assurance, promising to begin paying rent even if construction is delayed, while also agreeing to cover any budget overruns. In many cases, lenders are underwriting the hyperscaler’s balance sheet more than the developer’s, according to S&P’s Dhaval Shah.

Still, the structure carries risks. Unlike traditional cloud data centers, AI-training facilities are often built in remote locations and can strand assets if a tenant leaves. Furthermore, the AI economy relies heavily on circular financing — hyperscalers fund startups that simply use the money to buy tech directly back from them. With rising costs and lagging end-user revenues, economists warn this fragile loop could trigger a massive industry-wide debt crisis, according to a report (pdf) from the Center for Public Enterprise.

The sheer size and opacity of these financing vehicles are beginning to attract Washington’s attention. Recently, lawmakers, including Senator Elizabeth Warren, have formally urged the Financial Stability Oversight Council to probe the “complex and opaque” structures funding data centers, Bloomberg reports. Warren warned that if AI companies fail to rapidly increase revenues to service their massive debt loads, it could trigger destabilizing losses across interconnected financial institutions.

MARKETS THIS MORNING-

It is shaping up to be another turbulent day for markets, with the tech selloff over on Wall Street and uncertainty surrounding US President Donald Trump’s tariff policy keeping investors on their toes. Things are looking better for Asia-Pacific markets, with most of them in the green in early trading this morning.

TASI	10,984	+0.3% (YTD: +4.7%)
MSCI Tadawul 30	1,489	+0.8% (YTD: +7.3%)
NomuC	23,319	-0.4% (YTD: +0.1%)
USD : SAR (SAMA)	USD 3.75 Sell	USD 3.75 Buy
Interest rates	4.25% repo	3.75% reverse repo
EGX30	50,870	+2.6% (YTD: +21.6%)
ADX	10,639	+0.6% (YTD: +6.5%)
DFM	6,711	+1.8% (YTD: +11.0%)
S&P 500	6,838	-1.0% (YTD: -0.1%)
FTSE 100	10,685	0.0% (YTD: +7.6%)
Euro Stoxx 50	6,114	-0.3% (YTD: +5.6%)
Brent crude	USD 71.49	-0.4%
Natural gas (Nymex)	USD 3.00	+0.5%
Gold	USD 5,256	+0.6%
BTC	USD 64,685	-3.1% (YTD: -26.2%)
Sukuk/bond market index	924.57	+0.3% (YTD: +0.6%)
S&P MENA Bond & Sukuk	153.36	-0.1% (YTD: +1.0%)
VIX (Volatility Index)	21.62	+13.3% (YTD: +27.7%)

THE CLOSING BELL: TADAWUL-

The TASI rose 0.3% yesterday on turnover of SAR 4.4 bn. The index is up 4.7% YTD.

In the green: Retal (+6.7%), Lazurde (+5.4%), and Bawan (+4.8%).

In the red: UCA (-9.9%), Sport Clubs (-6.9%), and Albabtain (-6.8%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.4% yesterday on turnover of SAR 24.6 mn. The index is up 0.1% YTD.

In the green: Service Equipment (+9.7%), Accelerated Solutions (+7.9%), and Alnaqool (+7.4%).

In the red: Alqemam (-9.8%), Horizon Educational (-7.9%), and Future Vision (-6.7%).

Corporate actions

Saudi Awwal Bank’s board recommended approximately SAR 2.1 bn in dividends (at SAR 1 apiece) for 2H 2025, according to a Tadawul disclosure. The distribution date is yet to be determined. This will bring the total 2025 payout to SAR 4.1 bn, following the SAR 2.1 bn distributed in the first half.

CALENDAR

FEBRUARY

26 February (Thursday): Title deed registration deadline for 142.8k properties across 104 neighborhoods in Hail.

MARCH

12 March (Thursday): Deadline for real estate registration for 253.2k properties in 499 neighborhoods across Riyadh, Qassim, Makkah, and Hail.

18-23 March (Tuesday-Monday): Eid Al Fitr holiday (TBC).

21 March (Saturday): Fanatics Flag Football Classic, Kingdom Arena, Riyadh.

25-27 March (Wednesday-Friday): Future Investment Initiative Institute, Faena Hotel, Miami Beach.

31 March (Tuesday): Zatca’s 23rd E-invoicing integration wave deadline.

APRIL

6 April (Monday): Procurement and Supply Chain Futures Forum, Al Faisaliah Hotel, Riyadh.

6-7 April (Monday-Tuesday): Real Estate Supply Chain Forum, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

12-15 April (Sunday-Wednesday): Saudi Print & Pack, Riyadh International Convention & Exhibition Center.

12-15 April (Sunday-Wednesday): Riyadh International Industry Week, Riyadh International Convention & Exhibition Center.

12-15 April (Sunday-Wednesday): Saudi Plastics & Petrochem, Riyadh International Convention & Exhibition Center.

12-15 April (Sunday-Wednesday): Saudi Smart Logistics, Riyadh International Convention & Exhibition Center.

13-16 April (Monday-Thursday): Leap Tech Conference, Riyadh Exhibition & Convention Center – Malham.

20-22 April (Monday-Wednesday): The Future Hospitality Summit, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

20-22 April (Monday-Wednesday): Saudi Paper and Packaging Expo, Riyadh International Convention & Exhibition Center.

20-22 April (Monday-Wednesday): Sports Investment Forum (SIF), Riyadh

22-23 April (Wednesday-Thursday): The World Economic Forum’s Global Collaboration and Growth Meeting, Jeddah.

27-29 April (Monday-Wednesday): Aluminum Arabia, The Arena, Riyadh.

28 April (Tuesday): GC Summit Saudi Arabia, Riyadh.

MAY

3-9 May (Sunday-Sunday): The Global Sustainability Expo, The Arena Riyadh Venue.

5-6 May (Tuesday-Wednesday): SkyMove Air Cargo MENA, Riyadh.

24-28 May (Sunday-Thursday): Eid al-Adha holiday.

JUNE

21-24 June (Sunday-Wednesday): Saudi Food Exhibition and Conference, Riyadh Front Expo.

SEPTEMBER

15-17 September (Tuesday-Thursday) The Global AI Summit, King Abdulaziz International Convention Center, Riyadh.

23 September (Wednesday): Saudi National Day.

OCTOBER

12-15 October (Monday-Thursday): World Energy Congress, Riyadh.

NOVEMBER

24-28 November (Tuesday-Saturday): Aero Middle East and Sand & Fun, Thumamah Airport, Riyadh.

Signposted to happen sometime in 2026:

2H: Sabic’s USD 6.4 bn Fujian project in China to start production;
November: The UN Trade and Development Global Supply Chain Forum to take place in Saudi Arabia;
November: The Esports Nations Cup, Riyadh;
The Intervision international music competition will take place in Saudi Arabia;
6 July-23 August (Monday-Sunday): Esports World Cup, Riyadh.

Signposted to happen sometime in 2027:

The World Water Forum takes place in Riyadh;
The Ocean Race finishes in Amaala on the Red Sea;
Riyadh-Kudmi transmission line to be completed.

Signposted to happen sometime in 2Q 2027:

The Hail Region Water Networks Project is expected to be completed.

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Budget deficit widens to five-year high in 4Q 2025

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Etihad Salam getting closer to IPO?

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Budget deficit widens to five-year high in 4Q 2025

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Acwa powers up Turkey with 5 GW solar push

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Saudi introduces carve-outs to RHQ mandate

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Marafiq reaches financial close on SAR 1.9 bn wastewater plant in Jubail 2

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Bank AlJazira returns to debt market, Saudi joins global AI partnership

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Under-construction data centers tap ratings to fund AI buildup

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