Saudi Arabia’s public debt is rising substantially, driven by Vision 2030 investment as well as the US-Israeli war with Iran.
While the debt load is generally considered sustainable over the medium term, questions remain about whether Saudi Arabia has the institutional capacity and guardrails to manage its growing fiscal outlays.
In July, the IMF recommended stronger medium-term fiscal planning, greater transparency around fiscal risks and an independent institution akin to a fiscal council.
There is a strong case for such a watchdog, broadly modelled on the UK’s Office for Budget Responsibility (OBR) or the US Congressional Budget Office (CBO).
As Vision 2030 enters its next phase, the challenge is shifting from how much the government can borrow to how it decides what to spend.
At the start of the Iran conflict, Riyadh was in a position of strength: modest debt by global standards, substantial financial assets, deep access to capital markets and a temporary cushion from higher oil prices.
But the trajectory is changing. The IMF projects public debt at 32 percent of GDP in 2026, rising to 35 percent in 2027 and 42 percent by 2031. The fiscal deficit, meanwhile, is slated to come in at 3.5 percent of GDP this year.
The question is whether government institutions are strong enough to keep the investment programme aligned with medium-term fiscal capacity.
The institution’s influence would come through greater transparency, not least by helping to establish a credible framework for sustainable capital spending
Riyadh already shows signs of recalibrating and rationalising spending. Central to this is the reprofiling of flagship projects, including elements of Neom, where timelines and scope have been meaningfully scaled back.
But this isn’t simply about delaying individual projects – the harder task is managing the entire investment portfolio, weighing giga-projects against each other and against the government’s broader spending priorities.
Saudi Arabia needs to know how much capital spending it can sustain under different oil-price and growth scenarios, distinguish transformative projects from speculative ones, and gauge the fiscal exposure of projects that may need support after construction, especially those outside the traditional budget.
But does Saudi Arabia have the institutional machinery to decide where, when and how much to spend?
What would a Saudi fiscal watchdog look like?
The OBR and CBO offer useful precedents, though Saudi Arabia would need its own model, tailored to an economy still transitioning away from oil dependence and running one of the world’s largest state-led investment programmes.
Neither the OBR nor the CBO sets policy. Their value lies in providing independent analysis against which fiscal decisions can be judged, and in the discipline that comes from knowing forecasts will be scrutinised.
A Saudi watchdog could therefore:
- Independently assess medium-term fiscal assumptions (oil prices, growth, revenues, spending)
- Test the aggregate affordability of Vision 2030
- Bring off-budget fiscal risks into view
- Check forecasts and project assumptions against actual outcomes.
Its remit would need to extend beyond the central budget – capturing public entities, guarantees, public-private partnerships (PPPs) and major giga-project commitments where relevant. The goal would be to make liabilities and risks visible and consistently analysed.
That means expertise not just in public finance, but also in infrastructure, project finance, PPPs and sovereign guarantees – plus access to data from relevant public entities and the ability to analyse projects on a consolidated basis.
The institution’s influence would come through greater transparency, not least by helping to establish a credible framework for sustainable capital spending and giving Riyadh a clearer basis for deciding what to accelerate, delay or scale back.
For the institution to be credible, however, it would need real independence, a clear mandate, transparent methodology, secure funding, and leaders willing to publish uncomfortable conclusions.
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Moreover, it should complement the Ministry of Finance – not compete with it – meaning that the government sets policy while the watchdog tests the assumptions and risks behind it.
The creation of a fiscal watchdog would also reinforce the credibility of the country’s fiscal policymaking in the eyes of markets and investors, providing greater transparency around the assumptions underpinning medium-term spending plans. Sustained credibility could, in turn, help reduce perceptions of sovereign risk and potentially lower borrowing costs.
In sum, Saudi Arabia’s challenge is making sure the institutions governing an increasingly ambitious investment programme keep pace with it.
Vision 2030 will force choices about what to accelerate, delay and abandon. A fiscal watchdog wouldn’t make those choices for Riyadh, but it would make the costs, risks and trade-offs harder to ignore, helping keep Saudi Arabia’s ambitions matched to its fiscal capacity.
Amir Khan is a macroeconomist and strategist with experience advising banking groups, including MUFG, Saudi National Bank and Mizuho