Saudi Arabia’s war economy is catching up with Vision 2030

Mawadda Iskandar, The Cradle, September 25, 2026 —

The kingdom’s oil lifelines are under fire just as its grandest projects meet the limits of the Saudi treasury.

When Saudi Crown Prince Mohammed bin Salman (MbS) unveiled Vision 2030 on 25 April 2016, he promised to make Saudi Arabia less dependent on oil. The plan called for the private sector’s share of GDP to rise from 40 to 65 percent, non-oil revenue to climb from roughly 163 billion riyals to 1 trillion, and the Public Investment Fund (PIF) to grow from around 600 billion riyals to 7 trillion. Vast projects would carry the kingdom into a new economic era.

The announcement came a year after the Saudi-led war on Yemen began, with MbS serving as defense minister. A decade later, that war remains unresolved and the most ambitious targets of Vision 2030 remain out of reach. 

His subsequent policy of easing regional crises, including rapprochement with Iran and talks over Yemen, has come under renewed strain since the US-Israeli war on Iran began in February 2026. Saudi territory’s role in the US campaign, alongside the stalled Yemen road map and Riyadh’s continuing pressure on its southern neighbor, has brought the costs of confrontation back into focus. Riyadh had counted on quiet borders and open sea lanes to underwrite its vast building program. It now has neither assurance.

The megaprojects meet their limits

The strain on Vision 2030 predated the regional war. Rising construction and financing costs, uncertain returns, and foreign investment that has fallen short of expectations forced Riyadh to reconsider the pace and scale of its biggest projects. 

Many were conceived on the assumption that state spending would draw in enough private capital to keep construction moving and eventually produce a return. That capital has proved harder to secure at the necessary scale. 

Work on the Mukaab, the giant cube at the center of Riyadh’s New Murabba development, was halted for a reassessment of its financing and feasibility. NEOM has faced a wider review, including scaled-back plans for The Line and delays to other industrial and tourism projects. 

Sindalah island closed shortly after its 2024 opening, with no clear reopening date. A planned $1.5 billion railway in Tabuk was canceled after substantial spending, prompting a compensation dispute. NEOM has reportedly put the cost of terminating contracts over 2026–2030 at about $16 billion as it realigns its spending.

War tightens the fiscal vise

The war then disrupted traffic through the Strait of Hormuz, raising shipping and insurance costs and complicating Saudi oil exports. In revised figures for the second quarter of 2026, the General Authority for Statistics reported that GDP contracted 4.7 percent year on year as oil activity fell 24.8 percent. Non-oil activity grew just 0.9 percent.

Public finances entered the second half with much less room than Riyadh had planned. The 2026 budget projected revenue of 1.147 trillion riyals against expenditure of 1.313 trillion, leaving an expected deficit of 165 billion riyals. The first-half deficit approached 160 billion riyals, nearly the full-year target.

Higher oil prices could not fully compensate for lower export volumes and the growing cost of getting crude to market. The kingdom’s financing needs rose sharply as it borrowed to cover the deficit and refinance maturing debt. 

Those obligations cannot be deferred as easily as a construction timetable. Spending plans and payment schedules also came under pressure, making the question of which projects receive priority more urgent for a government still committed to its 2030 deadline.

The squeeze has reached businesses. During the first eight months of 2026, 489 Saudi companies reportedly entered bankruptcy or related proceedings, 70 of them in August. Plans to sell stakes in state-owned companies, an important source of funds for new investment, have faced a more difficult market.