Saudi Arabia passed its 2020 budget on Monday, projecting a widening deficit in the face of tumbling oil prices and production cuts that have hit the top crude producer's revenues.

The kingdom projected a shortfall of $50 billion for the year, up $15 billion its 2019 budget, according to an official statement read out on state TV.

It predicted next year's deficit would grow to 6.4 percent of GDP, up from 4.7 percent in 2019.

The statement released after a cabinet meeting chaired by King Salman said Riyadh would also cut spending for next year in a rare belt-tightening measure.

Spending was set at $272 billion, down 7.8 percent on 2019 estimates, while revenues were estimated at $222 billion, also lower by 14.6 percent.

Income from oil was projected at $136.8 billion, down from $160.5 billion in 2019, the finance ministry said.

Oil prices have remained sluggish at around $64 a barrel, despite additional production cuts agreed by producers' cartel OPEC and its allies last week.

Oil income accounts for about two-thirds of Saudi public revenues.

King Salman said his government is determined to continue to diversifying its sources of income and shift the kingdom away from reliance on oil.

The finance ministry reported that the kingdom spent $279.5 billion and had revenues of $244.5 billion in 2019, both lower than projections, leaving the shortfall at $35 billion.

Saudi Arabia, which pumps just under 10 million barrels per day, has posted a budget shortfall since 2014, when oil prices crashed, accumulating $358 billion in deficits up to the end of 2019, official figures show.

The finance ministry has projected that spending will continue to contract until 2022 as a result of weak oil prices and production cuts.

Saudi Arabia, the world's top oil exporter, has posted a budget deficit since 2014 when a crash in oil prices shrank its revenues
Saudi Arabia, the world's top oil exporter, has posted a budget deficit since 2014 when a crash in oil prices shrank its revenues AFP / Fayez Nureldine

In order to plug the growing budget shortfall, Saudi Arabia withdrew from its reserves, borrowed from domestic and international markets and last month, floated 1.5 percent of state energy giant Aramco.

That generated some $25.6 billion in the world's biggest ever stock sale.

Last week, OPEC and its allies agreed to an additional output cut of 500,000 barrels per day, set to start next month, along with an already agreed reduction of 1.2 million bpd.

Saudi Energy Minister Prince Abdulaziz bin Salman said the kingdom would unilaterally trim another 400,000 bpd to support sagging prices.

Saudi Arabia has also introduced reforms and subsidy cuts as part of its Vision 2030 economic transformation plan to reduce the country's dependence on oil.

The kingdom has slashed power and fuel subsidies as well as imposing fees on expatriate visas and implementing a five-percent value added tax.

The International Monetary Fund in October cut the forecast for Saudi GDP growth in 2019 to just 0.2 percent from 1.8 percent a few months earlier.

London-based Capital Economics said last week the Saudi economy could shrink this year due to low oil prices and production cuts.

Fitch Ratings in September downgraded its Saudi rating by a notch over rising regional tensions following unprecedented attacks on Saudi oil installations.

The agency said continued fiscal deficits also contributed to the downgrade.

Over the past five years, Saudi Arabia has been embroiled in a devastating war in neighbouring Yemen, amid heightening tensions with regional arch-rival Iran.