The Saudi government has mandated its state agencies to cut at least 20% from their budgets in a renewed austerity push in response to an oil price crash as well as the coronavirus pandemic which has prompted a slow-down in the crude oil market, according to a report published by Reuters.

The request comes as deal between OPEC and its allies on production cuts collapsed on Friday, which sent the oil price into freefall. The oil-producing countries met as demand for crude - notably from China - stagnated over the coronavirus pandemic which continues to spread worldwide.

The Saudi finance ministry asked government agencies to submit proposals for cuts between 20% and 30% for the 2020 budget, four sources told Reuters.

The cuts will target projects and contracts, which will likely be delayed or postponed, rather than hit salaries, said a source.

Saudi Arabia and its ally the UAE said on Wednesday they will together boost production by at least 3.5 million barrels per day (bpd), to 16.3 million bpd, from April escalating a price war with Russia, which refused a deal to cut output during Friday’s OPEC meeting.

The Saudi stock market - the largest in the Middle East - tumbled 9.2 percent at the start of trading on Tuesday with energy giant Saudi Aramco's shares diving 10 percent, well below its listing price.

Riyadh and Abu Dhabi, who rely heavily on oil revenues, also unveiled plans to raise their production capacities by one million bpd each.

Oil prices fell heavily on Wednesday after the Saudi and UAE announcements, while Riyadh slashed the prices of its oil to various regions to secure market share.

Oxford Economics projected on Tuesday that the price of Brent crude will "fall to and remain at $30 a barrel for the foreseeable future."

"This could trigger recession in a number of Gulf Cooperation Council economies that are already battling the headwinds of slower global growth and the spread of coronavirus," the UK-based group said.

Austerity measures and value-added tax were implemented for the first time ever in Saudi Arabia in 2016 in an attempt to tackle a multi-billion riyal deficit.Agencies contributed to this report.