IMF External Sector Report 2026: Imbalances Widen as Oil Exporter Surpluses Shrink
The International Monetary Fund published its 2026 External Sector Report on 30 July, under the title “Amid Rising Imbalances, the Case for Rebalancing”. The report assesses the external positions of 30 of the world’s largest economies on 2025 data, and its central finding is that global current account balances widened again last year, continuing a trend that has run since the pandemic and visibly reversing the decline that followed the global financial crisis.
For the Gulf the report carries an unusual signal. Global imbalances widened in 2025 even as the combined surplus of oil exporters narrowed, and in the Fund’s own account that has not happened before in a major widening episode.
Oil exporters were absent from a widening for the first time
China’s current account surplus increased by about USD 300 billion in 2025, roughly a quarter of a percent of world GDP, which the Fund describes as the largest current account widening in absolute terms over the past two and a half decades. Taiwan Province of China, Japan and Korea added surpluses of USD 47 billion, USD 24 billion and USD 23 billion respectively.
Set against that, surpluses fell in the euro area and among oil exporters, the latter because commodity prices were weaker. China’s surplus was the largest in the world in 2025 at about 0.6 percent of world GDP; the euro area ranked second at about a quarter of a percent; oil exporters sat just behind the euro area. The United States remained the largest deficit economy at about 0.9 percent of world GDP, a position that broadly offsets the combined surpluses of China, the euro area and oil exporters together.
The Fund draws the historical contrast explicitly. In all previous major widening episodes, including the 2003 to 2006 period that is the closest analogue, oil exporters contributed significantly to the rise in global surpluses. In 2025 they subtracted from it. On the creditor side the same pattern shows up in stocks rather than flows: net creditor positions narrowed slightly, and the narrowing was driven by declines among oil exporters offsetting increases in financial centres, China and Germany.
Just under half of the countries in the Fund’s External Balance Assessment sample saw their current account move further away from zero in 2025.
Saudi Arabia is the Gulf’s only assessed economy
Of the 30 economies covered in the report’s individual assessments, Saudi Arabia is the only Gulf state. The Fund judges its 2025 external position to have been moderately weaker than the level implied by medium-term fundamentals and desirable policies, while stating plainly that the external balance sheet remains strong.
The current account deficit widened to 2.6 percent of GDP in 2025 from 1.3 percent in 2024. The Fund attributes the move mainly to lower oil export revenue, with the average oil export price falling to USD 70.4 a barrel and oil exports declining to USD 213.7 billion on crude production averaging 9.5 million barrels a day, and to higher goods imports driven by continued investment and consumption growth. Working in the other direction was a 17 percent surge in non-oil exports.
| Measure | 2025 |
|---|---|
| Current account balance | −2.6 |
| Cyclically adjusted current account | −1.91 |
| Staff-assessed current account gap | −1.11 |
| Net international investment position | 56.6 |
| Gross external assets | 126.2 |
| Reserve assets | 36.1 |
| Gross external liabilities | 69.6 |
| Debt liabilities | 19.2 |
Percent of GDP. Debt liabilities are the debt component of the international investment position and are a different measure from gross external debt, which the Fund reports at 37.6 percent of GDP for the same date. Source: International Monetary Fund, 2026 External Sector Report, Saudi Arabia economy assessment.
The balance sheet, not the flow, is the story
Saudi Arabia’s net international investment position fell to 56.6 percent of GDP at the end of 2025 from 62.3 percent a year earlier, driven mainly by external inflows financing the wider current account deficit. External debt rose to 37.6 percent of GDP from 29.5 percent, and its share of gross liabilities to 54 percent from 50 percent. The Fund expects the net position to decline further, to around 38 percent of GDP by 2031, in line with sustained external funding needs supporting the Vision 2030 transformation.
Its assessment of that trajectory is measured. Despite the projected decline, the external balance sheet remains strong, and the accumulated assets serve both as protection against oil price volatility and as a store of exhaustible resource revenues for future generations. Gross external assets stood at 126.2 percent of GDP, composed of portfolio and other investments at about 55.2 percent, reserves at 28.6 percent and foreign direct investment at 16.1 percent.
Reserves are described as adequate for precautionary purposes on the Fund’s own metrics. Central bank net foreign assets stood at USD 436.6 billion at the end of 2025, equivalent to 34.2 percent of GDP, about 13 months of imports and 176 percent of the assessing reserve adequacy metric, up from USD 414.5 billion in 2024. Official reserve assets rose by about USD 23 billion over the year to USD 460 billion. The Public Investment Fund holds significant further foreign assets beyond these.
The financial account recorded net inflows of USD 71 billion in 2025 against USD 29.3 billion in 2024, driven by growing portfolio and other investment inflows supporting domestic investment and consumption, and complemented by a moderation in foreign asset accumulation by the Public Investment Fund and Aramco.
The qualifier the Fund attaches to its own numbers
Staff estimate a current account gap of −1.11 percent of GDP using the External Balance Assessment lite model, with a cyclically adjusted current account of −1.91 percent against a norm of −0.80 percent. The Fund then attaches an unusually candid caveat: the overall assessment is subject to significant model uncertainty because of the idiosyncratic characteristics of the Saudi economy.
The alternative models bear that out. Applying the commodity module, the consumption allocation rules suggest a gap of −3.9 percent of GDP under a constant real annuity rule and −6.5 percent under a constant real per capita rule, while the investment needs model suggests −3.65 percent. The estimated range around the headline gap runs from −3.11 to 0.89 percent of GDP, calculated using the standard error of Norway as a comparable oil-rich economy.
On the exchange rate the picture is similarly wide. The riyal has been pegged at 3.75 to the dollar since 1986. The nominal effective rate was relatively stable in 2025 and the real effective rate depreciated by about 0.7 percent, driven primarily by inflation differentials with trading partners, and as of March 2026 remained close to its end-2025 level. The current account model implies an overvaluation of 6.7 percent; the real effective exchange rate model implies 18.3 percent. The Fund notes that exchange rate movements have limited short-term effect on Saudi competitiveness in any case, since most exports are oil or oil-related and dollar-denominated, and imports have limited substitutability with domestic production.
Why it matters
The report’s practical conclusion for Saudi Arabia is that external adjustment will be driven primarily by fiscal policy, with the peg continuing to provide a credible policy anchor.
The fiscal trajectory the Fund sets out is one of steady improvement. The central government’s non-oil primary balance as a share of non-oil GDP is expected to improve continuously, from −23.3 percent in 2025 to −17.2 percent in 2031. The Fund’s recommended path is continued fiscal consolidation including enhanced revenue mobilisation and energy price reform to raise public saving, alongside sustained structural reform to diversify the economy and boost non-oil exports. It adds that industrial policies should remain narrowly targeted to objectives where externalities or market failures prevent effective market solutions.
For the wider Gulf the finding that global imbalances can now widen while oil exporters’ surpluses shrink is the more consequential observation. In 2025 the region’s external position was not the swing factor in the global balance that it was in the 2000s, and the recycling of Gulf surpluses was a smaller part of the global capital flow story than the historical pattern would suggest. Whether that holds beyond a single year depends on the oil price path, and the Fund’s own projections have Saudi Arabia’s deficit narrowing sharply in 2026. That has implications for how GCC issuance is absorbed and for how sensitive regional external accounts now are to decisions taken in Beijing and Washington rather than in the oil market alone.
What to watch
The Fund projects the Saudi current account deficit to narrow to 0.3 percent of GDP in 2026 as higher oil prices more than offset the effect of lower export volumes on receipts, before widening again to around 3 percent of GDP by 2031 on the medium-term oil price outlook and sustained investment-driven imports. That 2026 projection rests on a price assumption, and the balance between price and volume through the second half of the year is the thing to test it against.
The Fund also notes that a lack of detailed information on the nature of financial flows complicates analysis of the Saudi financial account, while judging that the strong reserve position and the size of Public Investment Fund assets limit the associated risks. Improved disclosure would change the quality of the assessment more than any single data point.
Sources
International Monetary Fund, 2026 External Sector Report, “Amid Rising Imbalances, the Case for Rebalancing”, 30 July 2026, Chapter 1, External Positions and Policies, and Chapter 2, 2025 Individual Economy Assessments.
