Saudi Keeps Borrowing to Pay off Existing Debt

Saudi Keeps Borrowing to Pay off Existing Debt

Srividya Kalyanaraman

Mon, August 31, 2026 at 5:47 PM GMT+3 3 min read

THE GIST

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here.

The Iran war and the resulting oil supply shock have the Kingdom of Saudi Arabia asking banks for more loans. Saudi Arabia's National Debt Management Center initiated talks with international banks for a syndicated loan of at least $6-8 billion, and asked to keep the tab open.

Separately, the state-owned oil company Aramco is looking to raise its own funds, suggesting that Riyadh is running short on the cheap options.

WHAT HAPPENED

Saudi Arabia's National Debt Management Center asked international banks to submit proposals for a five-year, U.S.-dollar syndicated loan in the $6-8 billion range, structured so the facility can grow beyond that ceiling if needed.

Tehran's strikes on Saudi energy infrastructure and continued Houthi threats to Red Sea shipping have also complicated Riyadh's plans to route oil exports bypassing the Strait of Hormuz. War-related economic damage, which is lost revenue plus added costs, already costed Riyadh $10 billion in April.

But Saudi Arabia is doing what the rich usually do: taking loans to service existing debt. This $8 billion sought sits inside a roughly $58 billion full-year 2026 borrowing program, built to cover a projected budget deficit of about $44 billion plus roughly $13.9 billion in maturing debt repayments.

But Riyadh wants to borrow money, even if its deficit is sliding. The finance ministry posted a second-quarter 2026 budget deficit of $9.14 billion, down sharply from $33.5 billion in Q1 as oil revenue rose 22% year-on-year.

But that still left a first-half shortfall of $42.6 billion, which is already close to the government's full-year deficit forecast of about $44 billion, financed entirely through borrowing, with no drawdown of reserves.

One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.

WHY IT MATTERS

Riyadh is diversifying its funding sources, meaning borrowing from everywhere, because bond markets alone aren't covering the gap the war has opened. The kingdom has emerged as one of the most active borrowers, raising about $6 billion in domestic and international bonds this year, while Aramco has raised another $4 billion.

The Public Investment Fund, the Kingdom's sovereign wealth fund, raised $7 billion in May, one of the first public-market deals since the Iran war began. Late last year, its National Debt Management Center raised a $13 billion, seven-year syndicated loan, a rare move that signaled the kingdom's efforts to tap non-market sources of capital.

That's all fine and dandy until the lenders come knocking. Asian and Chinese banks lent more than $15 billion in loans to the Gulf last year. Most of it went to Saudi Arabia and the United Arab Emirates, meaning any pullback in that lender base as the conflict drags on would hit Riyadh's financing options directly.

WHAT'S NEXT

Mohammed Bin Salman's Vision 2030 was meant to reduce Saudi Arabia's oil dependency. Instead, financing it now increasingly depends on the kingdom's ability to keep borrowing against future oil income. If the loans are priced with a wider spread from now, that would indicate lender caution.