Aramco has announced that it will pay a significantly lower dividend in 2025 than it did in 2024. This decline reflects a drop in the “performance-linked” dividend, as the company’s income has fallen due to lower oil prices and lower production. The total dividend for 2025 is expected to be $85.5 billion compared to $124.3 billion in 2024. With the government owning nearly 82% of Aramco, the 2025 budget will see a $32 billion drop in revenue from the dividend. The Public Investment Fund owns a further 16% of the company and will see a $6 billion drop in the dividend it receives.

Higher-Than-Budgeted Fiscal Deficit in 2025

The lower dividend has important implications for the government budget. Oil revenue’s contribution to the budget in 2025 could be $40 billion lower than in 2024. In addition to the $32 billion drop in dividends received from Aramco, royalty and tax payments could be $5 billion to $10 billion lower in 2025 if oil prices are in the low $70 per barrel range and oil production increases modestly. If non-oil revenue grows in line with nominal non-oil gross domestic product (about 5.5% in 2025), total government revenue would be around $304 billion, below the budget target of $316 billion. Even if the government achieves its ambitious target of cutting nominal spending by 6.5% (spending overruns in recent years suggest this target is optimistic), lower revenue would imply a government budget deficit of 3.3% of GDP in 2025 compared to the budget estimate of 2.3% of GDP. If spending is not cut from 2024 levels, the fiscal deficit could be as high as 5.4% of GDP, while if the recent drop in oil prices to below $70/bbl is sustained, the above revenue calculations could prove overly optimistic.

More Borrowing Ahead

Saudi Arabia has been active in global capital markets in early 2025. This is likely to continue. Unless the government can cut spending further than planned in the 2025 budget or new revenue can be found, additional borrowing will be needed to finance the budget deficit. The PIF will also be seeking additional financing as the $6 billion drop in the dividends it receives from Aramco comes at a time when the PIF is intending to scale up its investments from $40 billion a year to $70 billion a year. All in all, the government, the PIF, and Aramco are likely to tap domestic and international banks and capital markets for funding during the remainder of 2025.