Saudi Arabia’s Vision 2030 transformation plan is encountering a new challenge: credit limitations. As the kingdom strives to diversify away from oil, growing borrowing needs across state-linked firms, banks, and private sector participants are testing the limits of its financial system. According to a recent Moody’s report, the demand for credit is increasing at a rapid pace, driven by Vision 2030 megaprojects, including the NEOM city, Red Sea tourism, and Riyadh Air.
In the past five years, Saudi banks have struggled with loan growth outpacing deposits. As a result, the country’s loan-to-deposit ratio has surpassed 100%, a clear indication of the stress on its banking system. To meet these demands, banks have turned to capital markets and foreign funding, with foreign liabilities nearly doubling in the past five years. This reliance on foreign capital introduces significant refinancing and currency risks, especially as global market conditions remain volatile.
At the heart of this funding structure is the Public Investment Fund (PIF), which has become the largest borrower in Saudi Arabia’s Vision 2030 ecosystem. The PIF has quadrupled its debt since 2020, with plans to invest an additional SAR 1 trillion by 2030. This rapid expansion is fueling the country’s non-oil GDP growth, but it also raises concerns about rising leverage and the potential for financial strain.
The shift in financing strategies marks a turning point for Saudi Arabia, moving from state spending to a blend of sovereign wealth, foreign capital, and market-based financing. While the country’s transformation remains on track, the reliance on credit could pose long-term risks, especially if investor confidence wavers.
As Vision 2030 progresses, Saudi Arabia faces the challenge of balancing robust economic growth with fiscal responsibility, ensuring that the country’s future is not solely dependent on oil prices but on sustainable and diversified funding.
