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Banks in Saudi Arabia are borrowing internationally at their fastest ever pace, as they rebalance their books after years fuelling the kingdom’s rapidly growing economy.
The kingdom’s lenders collectively borrowed about $33bn in 2025, roughly three times the previous high of $10.5bn set the year before, according to Fitch Ratings.
“We thought 2024 was going to be a record year and that was going to be it,” said Redmond Ramsdale, head of Middle East banks ratings at Fitch. “And 2025 has obviously significantly exceeded that again.”
Credit growth has expanded rapidly since around 2020 because Saudi Arabia’s lenders have been helping fund much of Crown Prince Mohammed bin Salman’s “Vision 2030” trillion-dollar plan to reduce the country’s reliance on oil revenues, as well as sell mortgages in the rapidly expanding real estate market.
But that lending expansion has outpaced the growth of deposits in the kingdom, leaving the banks less able to make loans at the same blistering pace as the kingdom faces tightening liquidity after a decade of massive state spending.
The banks had been unable to match the strong credit growth “on the liability side with deposit growth and also on the capital side with internal capital generation to match”, said Ramsdale.
The ratio of loans to deposits for the 10 largest banks stood at nearly 106 per cent by the middle of 2025, according to Alvarez & Marsal, roughly 10 percentage points higher than the same period in 2023. The figure is also much higher than in neighbouring Gulf power the United Arab Emirates, whose biggest banks’ loan-to-deposit ratio is about 75 per cent.
The tight liquidity is forcing Saudi banks to look for alternative sources of financing, particularly from abroad. The “banks started going into the international market to fund the gap”, said Ashraf Madani, lead analyst on Saudi banks at credit rating agency Moody’s.
Foreign funding for Saudi banks leapt from 6 per cent of the total in 2020 to 11 per cent by June 2025, according to Moody’s.
“I certainly think that the limited foreign borrowing that Saudi banks have had in the past makes them attractive to lend to for foreign investors now,” said Tim Callen, a visiting fellow at the Arab Gulf States Institute in Washington and a former IMF mission chief to Saudi Arabia. “I also think the Saudi banking system is recognised as being strong, liquid and well regulated and supervised by SAMA [the central bank], all of which are pluses for investors.”
Saudi banks are also issuing more subordinated debt, which helps them diversify their funding sources but is of a lower repayment priority and therefore riskier.
The kingdom’s banking regulator has taken note of the banks’ increased tapping of foreign funding, and in May gave them a year to strengthen their countercyclical capital buffers from zero to 1 per cent of their total risk-weighted assets.
Some analysts expect Saudi banks to moderate their lending as the kingdom works to recalibrate its ambitious economic transformation agenda amid subdued oil prices, rising debt and widening deficits. Some megaprojects — including futuristic linear city The Line, the centrepiece of the vast Neom development — are being scaled back as Riyadh focuses on events the kingdom has signed up to host such as Expo 2030 and the 2034 football World Cup.
Even though some of its megaprojects are under review, Saudi Arabia’s economy is still expanding, partly thanks to raised oil production quotas by the Opec+ group of producers and robust growth of non-oil income. The IMF on Monday raised its forecast for Saudi GDP growth this year to 4.5 per cent from 4 per cent, estimating the country’s economy had expanded 4.3 per cent in 2025.
Ihsan Buhulaiga, a Saudi economist, said traditionally risk-averse local banks should reconsider their approach.
“If economic growth continues north of 4 per cent, banks need to expand their capitalisation and revisit their risk matrix so it fits better with what’s going on in the economy, which is very serious,” he said. “You cannot just sit pretty and say ‘OK, we’ll continue as usual as we used to do in 2010.’ No, things are different now.”
Yet some rating agencies expect lending growth by banks to slow slightly. Ramsdale said Fitch was projecting loan expansion of about 13 per cent in 2025, 1 percentage point behind 2024, and a further dip to 10 per cent for 2026.
Banks are “slowing down slightly to compensate for that tighter liquidity and tighter capitalisation,” he said.
Madani said Moody’s also expected Saudi “credit growth to ease up” as financing costs for banks rise.
