MSCI said it added Saudi to its EM watchlist after the kingdom fulfilled a number of requirements, including bringing settlement in line with leading international exchanges.
The upgrade is expected to be announced in mid-2018, with implementation following a year later, reports UAE newspaper The National.
The Saudi royal family also announced a shock change to its order of succession on Wednesday, deposing the crown prince and replacing him as next in line to the throne with 37-year-old prince Mohammad bin Salman.
The king removed his nephew, Mohammed bin Nayef, as his successor by royal decree and relieved him of all of his positions.
Bin Salman, the son of King Salman, has been seen as the driving force behind the oil-rich state’s economic reforms, having been appointed chair of the Council for Economic and Development Affairs in January 2015.
The newly appointed crown prince created a reform blueprint, called Vision 2030, to develop non-oil revenues, privatise the economy and create sustainable development for Saudi Arabia.
Some of the first measures included new taxes and cuts to subsidies, the creation of a sovereign wealth fund and a series of strategic economic reforms called the national transformation programme.
From 1 July 2017, levy a new tax on expats and their dependents in a bid to boost Saudi’s local employment and revenues following persistently weak oil prices.