Heavy borrowing by Saudi Arabia over the past few years has failed to spur economic growth because borrowed funds were mostly used to support current expenditure not projects, says a prominent analyst in the Gulf kingdom.

A sharp rise in borrowing from domestic and global banks to fund the budget deficit boosted the Gulf country’s debt-to-GDP ratio from only around 1.5 percent at the end of 2014 to nearly 29.9 percent at the end of 2024, said Saeed Al-Shaikh, a former member of Shura council (appointed parliament).

Al-Shaikh, an ex-chief economist at the Saudi National Bank, said Saudi Arabia’s GDP, the largest in the Arab world, has sharply fluctuated in the past period and recorded negative growth in some years due to its heavy reliance on unpredictable oil exports.

“Borrowing has had no evident impact on GDP growth, which continued to fluctuate as it shrank by 5.07 percent in 2020 and 2.93 percent in 2023...this indicates that the stimulant effects of borrowing have remained limited because it has not been directed to long-term productive sectors but to cover current expenditure,” Al-Shaikh wrote in the Saudi Arabic language daily Maal (money) on Monday.

Al-Shaikh said the private sector has outperformed the public sector over the past months, surging by around five percent in the first quarter of 2025 against an overall GDP growth of 1.06 percent.

But he argued that such good performance was linked to high public spending, adding that this made it dependent on the government and unable to spearhead growth in the Kingdom when public revenues decline.

Forecasts by the Riyadh-based Jadwa consultancy firm showed the Kingdom’s public debt will swell to around 32 percent at the end of 2025 and 33.5 percent at the end of 2026 in line with government plans to borrow again to finance the shortfall.

It estimated the debt at around 1.2 billion Saudi riyals ($320 billion) at the end of 2024 and is projected to rise to SAR1.34 billion ($357 billion) at the end of 2025 and nearly SAR1.47 billion ($392 billion) at the end of 2026.

(Writing by Nadim Kawach; Editing by Anoop Menon)

(anoop.menon@lseg.com)

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