By Jana Choukeir
DUBAI (Reuters) -Saudi Arabia’s path to fiscal consolidation faces risks, Fitch Ratings said on Friday, as lower oil prices and heavy spending commitments tied to the country’s Vision 2030 economic transformation plan weigh on the kingdom’s finances.
The Vision 2030 plan, led by the nearly $1 trillion Public Investment Fund (PIF), aims to reduce the country’s reliance on oil and develop more sustainable revenue streams, which requires hundreds of billions of dollars in investment.
Fitch Ratings’ warning that Saudi’s ambitious spending plans face risks follows the Saudi government’s 2026 pre-budget statement on Tuesday, which signalled a shift toward tighter fiscal discipline after a sharper-than-expected widening of the 2025 deficit.
Saudi, the world’s top oil exporter, now forecasts a fiscal shortfall of 5.3% of gross domestic product in 2025, nearly double the 2.3% initially projected, before narrowing to 3.3% in 2026. That compares with an earlier 2025 budget estimate of 2.9% for next year.
The deterioration in 2025 was driven by revenue shortfalls and overspending, Fitch said, attributing the revenue miss primarily to weaker oil income. However, it noted non-oil revenues likely remained robust on the back of a strong non-oil economy and conservative budgeting.
Flagship projects include NEOM, a massive futuristic urban and industrial development on the Red Sea nearly the size of Belgium.
The Saudi government forecasts its revenues will rise 5.1% in 2026 while spending will fall 1.7% versus 2025 projections. Fitch expects fiscal tightening through stable oil revenues, higher non-oil income and modest cuts to current and capital expenditures.
Reuters reported in April that falling oil prices were increasing pressure on Saudi Arabia to either rein in spending or raise debt to finance its ambitious agenda. Fitch said the fiscal strain underscored the kingdom’s vulnerability to oil market swings, even as it accelerates efforts to build alternative revenue streams.
(Reporting by Jana Choukeir, Tala Ramadan and Federico Maccioni; Editing by Susan Fenton)
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