Is Saudi Arabia going bankrupt?

Riyadh is turning to its ultra-rich as oil revenues lag behind the cost of megaprojects like Neom

January 30, 2026

Why is it pleading to its ultra-rich to contribute to the nation’s coffers?

Is Saudi Arabia going bankrupt? No. Saudi Arabia is not going bankrupt, but it is facing a liquidity squeeze or a “funding crunch.” This is confirmed by the IMF Article IV (June 2025), which notes that while the Kingdom still has strong buffers, it is experiencing a significant cash flow challenge as oil revenues fall short of fiscal needs [1].

The reality is that the Kingdom still holds massive foreign reserves (~$415 billion) and has a relatively low debt-to-GDP ratio (roughly 27%), especially compared to highly indebted economies such as the US or Japan.

The problem: cash flow, not insolvency

The core issue is a cash flow problem. Oil prices have hovered around $70–$75 per barrel, well below Saudi Arabia’s estimated fiscal breakeven of $96–$98 per barrel required to balance the budget. This breakeven range is supported by data from Macrotrends and the St. Louis Fed, which show that Saudi government finances need oil near the mid-$90s to avoid deficits [2].

Despite strong reserves, the Kingdom is running budget deficits because of high spending on projects under Vision 2030, including ultramodern developments like Neom and the desert resort Trojena.

Why is it pleading to its ultra-rich to contribute?

In January 2026, several news outlets including Bloomberg and Middle East Eye reported that the Public Investment Fund (PIF) has begun asking wealthy Saudi merchant families to “collaborate” and invest in domestic megaprojects as foreign direct investment (FDI) has lagged expectations [3].

Western investors have been hesitant to commit to high-cost projects – especially those with long timelines and uncertain returns – leaving a funding gap that Riyadh hopes domestic capital can help fill.

The implicit message from the Crown Prince and the PIF is: “You grew rich from the state’s oil contracts for decades; now it’s time to reinvest that wealth back into the Kingdom.”

How much is it spending on princes and princesses?

Official figures for allocations to the House of Saud are opaque because the Saudi state budget does not publicly break them out.

Historical context on royal stipends and the scale of royal household payments comes in part from WikiLeaks cables from 1996, which estimated royal stipends at around $2 billion per year at the time — a figure often cited for comparative context on budget opacity [4].

Since then, the size of the royal family has expanded, and no transparent, modern official accounting of these expenditures has been published.
Economists argue, however, that royal payouts are not the primary driver of the current deficit.

The larger contributors are:
• The $1.1 trillion committed to Vision 2030 construction projects
• The large public sector wage bill, which employs a significant portion of the Saudi workforce

What is the way out?

The long-term solution remains Vision 2030, but the Kingdom is in a race against time:
Diversification:
Saudi Arabia must build a non-oil economy — in sectors such as tourism, mining, AI, and logistics — before its financial buffers are depleted. Encouragingly, non-oil GDP is growing at around 4–5%, according to IMF projections [1], [5].
Austerity & Taxes:
Riyadh has already taken measures including a tripling of VAT to 15% and cuts to fuel and water subsidies to strengthen fiscal balance.
“Right-Sizing” Projects:

Several Vision 2030 megaprojects have been scaled back or delayed to manage cash flow. For example:
• The Line in Neom was reduced from a proposed 170 km corridor to a much smaller first phase
• Other projects have been delayed to spread out their cost over a longer period

References:

[1] Saudi Arabia: 2025 Article IV Consultation-Press Release; and Staff Report – August 4, 2025, imf.org/en

[2] Estimates Saudi Arabia’s fiscal breakeven oil price between $96–$98 per barrel for 2024–25 – macrotrends.net

[3] Saudi Arabia Looks to Tap Wealthy Families in New Quest for Cash – January 27, 2026, bloomberg.com

[4] Special Report: U.S. cables detail Saudi royal welfare program – February 28, 2011, reuters.com

[5] World Bank Data: Household consumption % of GDP (proxy for social contract shifts) – data.worldbank.org

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