A car fills up at a gas station in Jeddah

Saudi Arabia has announced plans to reduce its budget deficit with spending cuts, reforms to energy subsidies and a drive to raise revenues from taxes and privatization.

The 2016 budget, released by the finance ministry and cited by Reuters, marked the biggest shake-up to economic policy in the Kingdom for over a decade, and includes significant reforms.

The plan suggests the Kingdom is not counting on a major recovery of oil prices any time soon but is instead preparing for a multi-year period of cheap oil.

“Our economy has the potential to meet challenges,” Custodian of the Two Holy Mosques King Salman said in a speech, adding that the 2016 Budget launched a phase in which his kingdom would diversify its revenues.

The government ran a deficit of SR367 billion ($97.9 billion) in 2015, or 15 percent of gross domestic product, officials said in the Reuters report. The 2016 budget plan aims to cut that to SR326 billion.

Next year’s budget projects spending of SR840 billion, down from SR975 billion actually spent this year. The finance ministry said it would review government projects to make them more efficient and ensure they were necessary and affordable.

Revenues next year are forecast at SR514 billion, down from SR608 billion in 2015. The Brent oil price averaged about $54 a barrel this year but is now about $37.

In its budget statement, the finance ministry said it would adjust subsidies for water, electricity and petroleum products over the next five years.

Any changes will aim to make energy use more efficient and conserve natural resources, while minimizing the negative effects on lower- and middle-income Saudis, the ministry said in the agency report.

It also outlined other reforms including “privatizing a range of sectors and economic activities.”

The government plans to introduce a value-added tax in coordination with other countries in the region, and raise taxes on soft drinks and tobacco, the ministry said.

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