Executive Summary
Between 2000 and 2023, Saudi Arabia’s current account recorded deficits in only three years: 2015 and 2016, due to the decline in oil prices following the Asian financial crisis, and 2020, when oil markets were hit by the repercussions of the COVID-19 pandemic. Surpluses were therefore the defining feature of the Saudi current account, reaching a historic peak of USD 173.6 billion in 2012.
Since 2024, however, the Saudi current account has entered deficit territory. This development carries serious implications, as financing the deficit through external borrowing contributes to the rapid rise of public debt. It is therefore essential to examine the factors that have led to this shift.
Undoubtedly, the recent decline in oil prices has reduced export revenues, directly affecting the trade balance and, consequently, the current account. Yet other Gulf countries experienced similar oil price declines without recording current account deficits.
The shrinking trade surplus stems from the interaction of three factors: imports of equipment and materials required for mega-projects, Saudi Arabia’s response to U.S. pressure, and the deterioration of the terms of trade. In addition to the weakening trade surplus, the services account continues to suffer from a deep deficit despite improved tourism revenues.
The primary income account, which reflects capital income, still records a surplus due to the scale of Saudi investments abroad compared with foreign investments inside the Kingdom. However, this surplus remains limited and is steadily declining.
The most serious issue lies in the secondary income account, particularly expatriate remittances. The deficit in this account reached USD 54 billion in 2024 and is expected to continue rising in the coming years.
Taken together, these developments show that the current account surplus fell from USD 145 billion in 2022 to USD 25 billion in 2023 before turning into a deficit of USD 16 billion in 2024, which doubled in 2025. The deficit is projected to reach USD 51 billion by 2030.
Addressing the current account deficit requires fundamental adjustments to Saudi economic policy. Non-oil exports must be expanded, consumer imports reduced, and decisive measures taken to curb the budget deficit, given its strong connection to the current account imbalance.
Introduction
Since 2024, Saudi Arabia’s external financial position has entered a worrying phase, with deficits becoming the defining feature of the current account. Falling oil prices are no longer the sole explanation for this development. Other Gulf states, which also rely heavily on oil revenues, have continued to record current account surpluses and are expected to maintain them over the next five years.
This makes it necessary to analyze the roots of the Saudi deficit by examining the four components of the current account: the trade balance, services, primary income, and secondary income.
This study begins with a conceptual overview before examining each of the four current account components in detail. It then discusses the methods used to finance the deficit and concludes with a set of policy recommendations.
I. Preliminary Overview
The current account reflects a country’s revenues (credits) and expenditures (debits) vis-à-vis the rest of the world, including merchandise exports and the repatriation of profits from foreign investments. It captures the financial transactions between residents and non-residents according to internationally recognized standards.
The current account is closely linked to the state budget. In Saudi Arabia, government revenues derive from several sources, most importantly oil revenues generated by petroleum exports. Accordingly, budget revenues rise and fall in line with export performance.
Saudi Arabia also possesses a massive sovereign wealth fund—the Public Investment Fund (PIF)—whose investment income is included under the primary income account of the current account. These revenues constitute an important source of non-oil government income. As returns on the fund increase, both the fiscal position and the current account improve, and vice versa.
On the expenditure side, the budget consists of both current and capital spending. Part of these expenditures requires importing equipment and materials from abroad, thereby affecting the trade balance.
The state budget allocated approximately USD 72 billion to the military sector, including substantial spending on imported weapons. Economic development projects also require imported technology, expertise, and raw materials. These imports increased significantly during 2023, 2024, and 2025 as the Kingdom accelerated the implementation of mega-projects.
The following table illustrates the evolution of the current account and shows that it shifted from surplus to deficit while the size of the deficit continues to rise steadily.
II. The Trade Balance
The trade balance constitutes the largest component of the current account. It includes all exported and imported goods and has historically recorded surpluses that are now steadily shrinking due to falling exports and rising imports.
1. Declining Exports
Saudi Arabia holds the world’s second-largest proven oil reserves after Venezuela and is the world’s second-largest crude producer after the United States. Oil exports therefore play the dominant role in the trade balance, and falling oil prices generally lead to declining export revenues.
At the end of July 2022, the OPEC basket price stood at USD 110.8 per barrel, pushing oil export revenues to USD 327 billion. By July 2023, the price had fallen to USD 86.4, reducing revenues to USD 247.3 billion. In July 2024, prices declined further to USD 79.4, bringing revenues down to USD 223.3 billion, before falling again to USD 70.9 in July 2025. No clear signs of recovery are expected in 2026.
Unlike Kuwait, however, Saudi Arabia also relies on non-oil exports such as electrical equipment, chemical products, transport equipment, aluminum, gold, and weapons. Some of these goods consist of re-exported imports. In 2024, non-oil exports generated USD 82.4 billion.
Overall, total exports declined sharply between 2022 and 2025, directly affecting the current account.
2. Rising Imports
Saudi Arabia imports a wide range of civilian and military goods to meet growing domestic demand. Electrical appliances account for more than one quarter of total merchandise imports, followed by transport equipment—particularly automobiles—as well as chemical products, weapons, and gold.
China is Saudi Arabia’s largest source of imports, followed by the United States, the UAE, and India. China is also the largest importer of Saudi goods.
In terms of use categories, intermediate imports accounted for 42.2% of total imports, consumer imports 32%, and capital imports 25.8%.
Total imports reached USD 189.9 billion in 2023 and rose to USD 213.7 billion in 2024, an increase of 12.4%. Combined with declining exports, this caused the trade surplus to narrow and pushed the current account into deficit.
3. Structural Problems in the Trade Balance
The Saudi trade balance suffers from three major structural issues.
First, mega-projects such as The Line require enormous imports of machinery and materials. Although these projects are productive in nature and aim to boost tourism and employment, they significantly increase imports and reduce the trade surplus.
Second, U.S. pressure has played an important role. The decline in Saudi Arabia’s trade surplus in 2025 coincided with Washington’s efforts to reduce the large American trade deficit. The United States pressured many countries, including Gulf states, to increase investments and imports from the U.S. Saudi Arabia agreed to raise investments and imports from the United States to nearly USD 1 trillion over four years. In return, Washington offered no major trade concessions and instead imposed additional tariffs on Saudi exports.
The Saudi trade balance with the United States has remained in deficit for years. In 2024, Saudi exports of goods and services to the U.S. totaled USD 15 billion, while American exports to Saudi Arabia reached USD 24.4 billion.
Third, the deterioration of the terms of trade remains a central problem across Gulf economies, particularly Saudi Arabia. Export prices—especially oil-related products—have fallen, while import prices from industrialized countries continue to rise. According to the IMF, Saudi Arabia’s terms of trade deteriorated by 6% in 2024.
This means that rising import costs result not only from higher quantities but also from higher prices, leading to declining purchasing power, rising inflation, and a worsening current account deficit.
III. The Services Account Deficit
The services account includes tourism, transport, construction, and related services. It suffers from a chronic deficit exceeding USD 60 billion, absorbing more than one quarter of Saudi oil export revenues.
1. Tourism
Historically, Saudi tourism services recorded deficits because Saudi spending abroad exceeded revenues from Hajj and Umrah. This situation has changed due to the growing number of pilgrims and the expansion of non-religious tourism.
The number of foreign visitors rose from 18 million in 2015 to 29 million in 2024, making Saudi Arabia the second-largest Arab destination after the UAE.
Makkah remains the most visited city, attracting nearly ten million foreign visitors annually, while Riyadh received only around three million visitors. Religious tourism remains central, although entertainment and family visits are increasingly important.
In 2024, tourism revenues reached USD 40.9 billion, while Saudi spending abroad totaled USD 27.5 billion, generating a travel surplus of USD 13.4 billion.
2. Transport
Unlike tourism, the transport sector suffers from a substantial deficit. In 2024, transport revenues reached USD 8 billion, while expenditures climbed to USD 33 billion, meaning the transport deficit far exceeded the tourism surplus.
3. Construction Services
Construction services include spending on buildings, roads, bridges, and infrastructure. Although revenues from these services increased slightly between 2023 and 2024, expenditures remained extremely high, resulting in a persistent deficit.
Overall, the services account continues to post a chronic deficit that heavily burdens the current account.
IV. The Declining Surplus in the Primary Income Account
The primary income account consists of income from Saudi investments abroad (credits) and income generated by foreign investments inside Saudi Arabia that is repatriated abroad (debits).
1. Saudi Investments Abroad
A large share of Saudi external investment income comes from the Public Investment Fund and Saudi Aramco.
The PIF’s assets reached USD 925 billion, ranking sixth globally among sovereign wealth funds. Saudi Arabia relies heavily on the fund to expand non-oil revenues and diversify the economy under Vision 2030.
Meanwhile, Saudi Aramco maintains extensive overseas investments, including refining and petrochemical assets in the United States, South Korea, Pakistan, and Japan. These investments generate profits that contribute positively to the primary income account.
2. Foreign Investments in Saudi Arabia
In 2025, total foreign investment assets in Saudi Arabia amounted to USD 1.087 trillion, including USD 273 billion in foreign direct investment and USD 814 billion in portfolio investments.
Foreign investments are concentrated in manufacturing, trade, finance, and transport. The Eastern Province accounts for the largest share, followed by Riyadh and Makkah.
Saudi Arabia’s 2024 Investment Law guarantees equal treatment between domestic and foreign investors and allows unrestricted repatriation of capital and profits. However, foreign participation remains restricted in strategic sectors such as arms manufacturing, real estate in Makkah and Madinah, and Hajj and Umrah services.
While the primary income account still records a surplus, the IMF expects this surplus to shrink gradually to USD 6 billion by 2030, negatively affecting the current account.
V. The Secondary Income Deficit
Unlike the primary income account, the secondary income account records a chronic deficit. It mainly includes government spending abroad and expatriate remittances.
Government Expenditures Abroad
These include diplomatic expenses and contributions to international organizations. In 2024, government spending abroad reached nearly USD 4 billion.
Expatriate Remittances
Saudi Arabia hosts around 14.2 million workers, including 10.1 million foreigners. Expatriates work across construction, energy, healthcare, education, and services.
Saudi Arabia is the world’s second-largest source of remittances after the United States. Transfers rose from USD 38 billion in 2023 to USD 45.7 billion in 2024, an increase of 20%.
In 2012, expatriate remittances absorbed 9% of oil export revenues. By 2024, this ratio had risen to 20.4%, meaning that one out of every five barrels exported effectively financed remittance outflows.
These remittances play a major role in pushing the current account from surplus into deficit.
VI. Financing the Deficit
Deficits in either the state budget or the current account indicate that a country is spending beyond its productive capacity. This raises the issue of financing.
Although Saudi Arabia’s balance of payments has often recorded deficits, the Kingdom’s foreign reserves remained stable at around USD 450 billion over the past five years. This stability reflects the government’s preference for external borrowing over drawing down reserves.
Saudi Arabia’s monetary policy depends on a fixed exchange-rate regime pegged to the U.S. dollar. Maintaining this peg requires substantial reserves to defend the currency. Drawing heavily on reserves could undermine confidence in the peg and weaken the country’s credit rating.
As a result, Saudi Arabia increasingly relied on external borrowing. The Kingdom retained an A+ rating from both Fitch and Standard & Poor’s despite deteriorating fiscal and current account conditions.
External government debt rose from USD 27 billion in 2016 to USD 143 billion by September 2025. At the same time, total public debt reached USD 391 billion in the second quarter of 2025.
This dynamic has created a vicious cycle: deficits lead to borrowing, borrowing increases interest payments, higher interest payments expand expenditures, and larger expenditures generate further deficits.
The shift toward debt-financed deficits represents a fundamental change in Saudi fiscal policy under Vision 2030. Before 2015, deficits were largely financed through domestic borrowing and reserve drawdowns. Since 2016, external borrowing has become a central financing tool.
VII. What Should Be Done?
Addressing the current account deficit without depleting reserves or sovereign wealth assets requires action on two interconnected fronts: the current account itself and the state budget.
1. Reforming the Current Account
The most effective solution lies in expanding non-oil exports. Saudi Arabia has already made notable progress in this regard, but further efforts are needed to improve the competitiveness of Saudi products both domestically and internationally through technological upgrading and lower production costs.
Non-essential imports—particularly consumer goods, which account for roughly one third of total imports—should be reduced. This may require revisiting tariff policies and raising customs duties on consumer imports to encourage domestic production and generate additional public revenues.
The chronic services deficit must also be addressed. Saudi Arabia could draw lessons from the UAE, where tourism and transport generate consistent services surpluses.
In addition, greater emphasis should be placed not only on expanding the assets of the Public Investment Fund but also on increasing the income generated by those assets.
As for expatriate remittances, some proposals suggest redirecting them toward domestic investment. However, the effectiveness of such policies would remain limited, since most foreign workers remit money to support their families abroad. Imposing taxes on remittances may reduce official transfers but would likely encourage informal channels.
2. Reforming the State Budget
Reducing the current account deficit also requires tackling the budget deficit.
Lower public spending would reduce imports and improve the trade balance. On the revenue side, higher customs duties could increase fiscal revenues while simultaneously curbing imports.
Conclusion
Saudi Arabia’s current account consists of four components: two accounts that still record shrinking surpluses—the trade balance and primary income—and two accounts with growing deficits—the services account and secondary income.
As a result, the current account shifted rapidly from surplus to deficit beginning in 2024, and this trend is expected to persist for years.
Although declining oil exports played a major role in this transition, oil market conditions alone do not explain the deterioration. Other Gulf economies remain in surplus despite similar dependence on hydrocarbons.
The Saudi current account deficit carries serious implications, including a sharp increase in external debt, slower economic growth, mounting inflationary pressures, rising unemployment, worsening fiscal deficits, pressure on foreign reserves, and the risk of credit-rating downgrades.
A current account surplus does not necessarily reduce indebtedness—as seen in 2022—but persistent deficits inevitably fuel debt accumulation.
Saudi Arabia must therefore address deficits across all components of the current account without undermining productive investment. At the same time, the government should curb non-productive expenditures—particularly certain military expenses—and increase non-oil revenues, including through progressive taxation on high-income Saudis.
Only then can Saudi Arabia achieve sustainable fiscal and external stability, with positive repercussions for economic growth, employment, and living standards.
