Saudi Arabia, one of the world’s richest Islamic countries, is preparing to raise an $8 billion loan despite crude oil prices remaining well above their regular levels. The move has raised questions about the state of the Saudi economy and whether the Iran war, falling oil exports and its huge Vision 2030 spending plans are putting pressure on the kingdom’s finances.
Saudi Arabia holds around 17 per cent of the world’s oil reserves and remains one of the biggest oil-producing and exporting countries. Its economy is the world’s 17th largest, with a GDP of around $1.39 trillion, or approximately Rs 132 lakh crore. Saudi Arabia has not directly joined the Iran war, but the conflict has had a significant impact on its oil sector. Several Saudi oil fields, refineries and energy facilities have been targeted, affecting production as well as exports. Saudi Arabia’s National Debt Management Centre has started discussions with banks to raise the loan. State-owned oil giant Aramco is also holding talks with banks for borrowing. The kingdom is looking to raise a five-year syndicated loan through international banks and financial institutions.
In today’s episode of DNA, Rahul Sinha, Managing Editor of Zee News, conducted a detailed analysis of why Saudi Arabia is seeking fresh borrowing, how the Iran war has affected its oil production and exports, and whether its close ties with Pakistan have added to the country’s financial burden.
However, oil accounts for around 22 per cent of the country’s GDP. The non-oil private sector contributes about 55 per cent, while government services and other sectors account for the remaining share. Around 85 per cent of the Saudi government’s income comes from oil. The attacks on the Manifa and Khurais oil fields affected around 600,000 barrels per day of oil production. Iran also carried out a drone attack on the Ras Tanura refinery, Saudi Arabia’s largest refinery, which has a capacity of 550,000 barrels per day. The SATORP refinery, which previously refined around 460,000 barrels of oil per day, is currently operating at 70 per cent capacity. The Abqaiq processing complex, which processes more than 7 million barrels of oil a day, has also been affected. Saudi Arabia’s GDP fell by around 5 per cent in the second quarter of the financial year, its biggest decline since the Covid pandemic. The country’s budget deficit reached around $34 billion, or Rs 3.2 lakh crore, between April and June. This was described as Saudi Arabia’s biggest quarterly deficit, with 76 per cent of the full-year projected deficit recorded in just those three months. The pressure on Saudi finances cannot be understood without looking at Crown Prince Mohammed bin Salman’s Vision 2030, launched in April 2016. Tourism currently contributes around 7 per cent of Saudi Arabia’s GDP, with a target of taking that figure to around 10 per cent by 2030. The planned $8 billion loan is not Saudi Arabia’s first major borrowing exercise. In 2016, the kingdom took a $10 billion five-year loan to help cover its budget deficit after crude oil prices fell. In March 2018, Saudi Arabia borrowed $16 billion from a group of 16 banks, mainly to repay the 2016 loan and fund other development work. In December 2025, it raised another $13 billion through a seven-year syndicated loan to fund electricity, water and other infrastructure projects.
As a result, Saudi Arabia’s oil exports fell by 94 per cent, while the kingdom cut its total oil production by around 2 million barrels per day. Despite this diversification, oil remains crucial to government finances. This dependence has become a major issue as the kingdom faces disruption to production and exports amid the Iran war. The refinery partially resumed operations in May, but has not been operating at full capacity. The SAMREF refinery, Riyadh refinery and Ju’aymah gas-processing unit were also targeted, affecting production. After the Strait of Hormuz was closed, Saudi Arabia relied on its East-West pipeline to transport crude oil. The pipeline was also targeted, further affecting Saudi oil exports. The impact was reflected in the economy. The ambitious plan aims to reduce the kingdom’s dependence on oil by expanding tourism, technology and manufacturing. Projects such as NEOM are being developed to create a global centre for business and technology. Saudi Arabia is also opening its doors to international tourists beyond religious tourism, while investing heavily in infrastructure and international sporting events. The government is also trying to reduce dependence on public-sector employment and increase the role of private businesses. But these projects require huge amounts of money. With oil revenues under pressure, borrowing has become an important source of funding.
The latest $8 billion borrowing is expected to be used partly to cover the budget deficit and partly to fund infrastructure projects. The kingdom has provided around $8 billion in loans to Pakistan. In April this year, it provided a $3 billion loan to Pakistan at a time when Islamabad needed to repay a $3.5 billion loan to the UAE. During US President Donald Trump’s visit to Riyadh in May 2025, Saudi Arabia committed to investing $600 billion in the US across areas including defence, artificial intelligence, energy and technology. During Crown Prince Mohammed bin Salman’s visit to Washington in November 2025, the planned US investment was increased to $1 trillion — an amount roughly equivalent to Saudi Arabia’s annual GDP. Saudi Arabia remains a wealthy country, but the combination of reduced oil exports, a large budget deficit and massive spending under Vision 2030 has increased pressure on its finances. Saudi Arabia needs crude prices of around $108-$111 per barrel to cover its deficit, while the current price is around $92.
The kingdom’s decision to borrow, therefore, does not necessarily mean that Saudi Arabia has run out of money. Saudi Arabia’s financial commitments to Pakistan have also come under scrutiny. Saudi Arabia has also made major investment commitments to the United States. The Iran war has added another layer of uncertainty by disrupting oil production, refining and exports. that benefit weakened after prices fell again in August Although higher oil prices briefly provided some relief. Instead, the loan reflects the financial pressure created by lower oil revenues and the enormous cost of maintaining its development plans while it attempts to transform its economy beyond oil.
