Riyadh confirms capital expenditure cuts
7 May 2025
Saudi Arabia has reported a 19% drop in government capital expenditure (capex) during the first quarter of this year compared to the same period last year. Capex spending in Q1 2025 was SR27.8bn ($7.4bn), down from SR34.5bn in Q1 2024.
The Ministry of Finance reported the drop in expenditure in its Quarterly Budget Performance Report for Q1 2025.
The government’s reduction in capex occurred at the same time as a drop in contract awards. According to regional projects tracker MEED Projects, there was a significant reduction in contract awards during Q1 2025.
There were $16.9bn of contract awards in the kingdom during Q1 2025, which includes private and public sector clients – including the Public Investment Fund (PIF) and its subsidiary development companies, as well as public-private partnership (PPP) projects.
The number of contract awards has also declined. According to MEED Projects, there were 108 contract awards during Q1 2025, which is down from 191 during Q1 2024 and 186 in Q4 2024.
Big deals
The largest project deal during Q1 2025 was the $2.2bn PPP deal awarded by Saudi Water Partnership Company (SWPC) to develop and operate the kingdom’s second independent water transmission pipeline (IWTP). The project involves building a 587-kilometre pipeline that can transmit 650,000 cubic metres a day of water between Jubail in the Eastern Province and Buraydah in the Qassim region. A developer team comprising local companies Aljomaih Energy & Water, Nesma Company and Buhur for Investment Company was selected for the project.
Only two other contract awards were valued at over $1bn. Saudi Aramco awarded Larsen & Toubro Energy Hydrocarbon, a subsidiary of India’s Larsen & Toubro Group, a $1.5bn contract to build a large-scale carbon capture and storage hub in Jubail Industrial City.
Gigaproject developer Diriyah Company awarded the other $1bn-plus deal. It awarded a joint venture of local firm El-Seif Engineering & Contracting, Beijing-headquartered China State Construction Engineering Corporation and Qatari firm Midmac Contracting a $1.3bn contract to build the Royal Diriyah Opera House.
The total value of contract awards in Q1 2025 was down by almost half compared to the $33.5bn of contract awards made during Q1 2024. On a quarterly basis, the drop is more than 60% compared to the $42.7bn of contract awards made during Q4 2024.
Budget deficit
For the broader economy, Saudi Arabia ran a deficit of SR58.7bn during Q1 2025, which was fully financed through borrowing, as there were no withdrawals from government reserves.
Public debt increased in both domestic and external components. Domestic debt closed at SR797bn, and external debt closed at SR531.7bn, indicating active debt management strategies to finance the deficit.
Most recently, the National Debt Management Centre announced the closure of its April 2025 issuance under the government’s Saudi riyal-denominated sukuk programme, with a total allocation amounting to SR3.710bn.
The sukuk issuance was structured into four distinct tranches to cater to varying investor needs. The first tranche, valued at SR1.315bn, is set to mature in 2029. The second tranche, amounting to SR80m, will mature in 2032. The third tranche, with a size of SR765m, is scheduled for maturity in 2036, while the fourth tranche, the largest at SR1.55bn, will mature in 2039.
In Q1 2025, total revenues reached SR263.6bn, with oil revenues accounting for SR149.8bn. This signifies a notable 18% decrease in oil revenues compared to the same period in 2024.
Also, oil income in the first quarter of this year accounted for 56% of total government revenues, down from 62% in the same period last year.
The slide in oil revenues is mainly due to lower crude oil prices, with the first quarter average for global benchmark Brent declining by 15% to around $75 a barrel compared to the same period in 2024.
Oil production
Oil production cuts by the Opec+ alliance also led to a fall in oil revenues for Saudi Arabia. The kingdom’s crude output declined by 1% in the first quarter to 8.95 million barrels a day (b/d), according to Opec data.
Saudi Arabia and Russia-led Opec+, however, began unwinding 2.2 million b/d of oil production cuts from April, with the coalition recently announcing a further output hike of 411,000 b/d in June. This move could result in an increased oil market share for Saudi Arabia, bringing in more oil revenues for the kingdom in the second quarter.
Non-oil revenues increased by 2%, reaching SR113.8bn, indicating some success in diversification efforts. Taxes on goods and services and other revenues contributed to this rise.
Total expenditures stood at SR322.3bn, which was a 5% increase on Q1 2024. Although capex decreased, other areas of spending increased.
Social spending
Notably, social benefits saw a significant 28% increase, reflecting the government’s commitment to social welfare programmes. Compensation of employees and use of goods and services also experienced increases.
For sectors, health and social development saw a 19% increase in actual expenditure compared to Q1 2024. This indicates a strong focus on these areas. Public administration also experienced a notable 14% increase.
Sectors such as municipal services and economic resources recorded slight decreases in spending.
The Finance Ministry report also provides insights into the government’s reserves and current account balances, with closing balances of SR393bn and SR91bn, respectively.
MEED’s April 2025 report on Saudi Arabia includes:
> GOVERNMENT: Riyadh takes the diplomatic initiative
> ECONOMY: Saudi Arabia’s non-oil economy forges onward
> BANKING: Saudi banks work to keep pace with credit expansion
> UPSTREAM: Saudi oil and gas spending to surpass 2024 level
> DOWNSTREAM: Aramco’s recalibrated chemical goals reflect realism
> POWER: Saudi power sector enters busiest year
> WATER: Saudi water contracts set another annual record
> CONSTRUCTION: Reprioritisation underpins Saudi construction
> TRANSPORT: Riyadh pushes ahead with infrastructure development
> DATABANK: Saudi Arabia’s growth trend heads up
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