The fall in the price of oil has resulted in Saudi Arabia posting a 2015 budget deficit of 15 per cent of GDP, forcing spending cuts of 14 per cent in 2016, the government said overnight.

Saudi Arabia’s stock market fell sharply in early trade on Tuesday after a 2016 state budget, announced late on Monday that included spending cuts, rises in fuel, gas feedstock and electricity prices, and tax rises.

The country reported that its budget deficit – the amount in which expenditures exceed revenue – for 2015 hit $98 billion (£65.7 billion).

The impact of low oil prices on Saudi Arabia’s 2016 plans were made clear through several strategies the ministry outlined in its 2016 guidance.

Jadwa Investment’s forecast report, which was released on Wednesday, said the Saudi economy will grow by only 1.9 percent next year, down from this year’s figure of 3.3 percent and 3.5 percent in 2014, AFP reported. The actual price of Saudi oil in 2015 averaged $49 a barrel.

The Saudi government has been digging into its large foreign reserves, built up during years of higher oil prices.

The leading member of Organization of Petroleum Producing Countries (OPEC) has maintained high output despite requests from some members such as Venezuela to cut production to fix the prices.

The budget is the first under King Salman, who took over at the helm of the monarchy in January. After the announcement of increase in fuel prices in Saudi Arabia by more than 50 per cent yesterday, petrol stations in the kingdom witnessed huge traffic and crowds.

The King added the 2016 budget launched a phase in which the country would diversify its revenues away from oil.

Policymakers now plan to slash the deficit to 327bn riyals in 2016, by cutting back spending from 975bn riyals to 840bn riyals.

It comes after the International Monetary Fund warned in October that Riyadh would run out of money within five years if it did not tighten its belt.

Economy Minister Adel Fakeih said yesterday that 20 billion riyals of this year’s spending overshoot was due to increased military and security spending related to the military operation against Shiite Houthi rebels in Yemen.

The kingdom withdrew more than $80bn this year from its reserves, which stood at $732bn at the end of 2014, and issued bonds worth about $20bn.

Al-Falih also said he was confident that local industries, including the Saudi petrochemical sector, will adjust to the rise in domestic energy prices and remain competitive.