The International Monetary Fund backed Saudi Arabia's sweeping economic reform plan on Thursday and said the kingdom was cutting spending at the right speed to cope with a huge state budget deficit caused by low oil prices.

Late last month, Deputy Crown Prince Mohammed bin Salman announced steps to reduce the kingdom's dependence on oil exports over the next 15 years, including subsidy cuts, tax rises, sales of state assets, a government efficiency drive and efforts to spur private sector investment.

The IMF had for years been urging Saudi Arabia to adopt many of those measures, and in a statement on Thursday it said the reform plan aimed for "an appropriately bold and far-reaching transformation of the Saudi Arabian economy".

"The supporting policies that will be announced in the coming months are expected to set out how these goals will be achieved," IMF official Tim Callen said after leading a team to Saudi Arabia this month for annual consultations with the Fund.

"To ensure their success, the reforms will need to be properly prioritised and sequenced, and the appropriate pace of implementation carefully assessed."

Riyadh has been cutting spending and trying to raise fresh revenues as it grapples with its budget deficit, which totalled $98 billion in 2015. The IMF predicted the deficit would stay large this year, at about 14 percent of gross domestic product compared to 16 percent last year.

But it welcomed the government's spending controls and changes to domestic energy prices announced last December, saying: "Fiscal policy is appropriately adjusting to the drop in oil prices."

The IMF also said it approved of the way in which the government was financing its deficit with a combination of drawing down its financial reserves and issuing debt at home and abroad. -Reuters