Saudi Arabia announced plans to boost spending to record levels next year as it unveiled a budget intended to drag the economy out of recession.

The finance ministry on Tuesday said expenditure would hit more than SR978bn ($261bn) in 2018, up from SR926bn the previous year.

It is the first expansionary budget in three years and comes at a critical period for Crown Prince Mohammed bin Salman as he consolidates his power and attempts to implement ambitious reform programmes to modernise the conservative kingdom.

The economy has been struggling since the collapse in oil prices in 2014. The government has been forced to slash spending, cut subsidies and tap international debt markets as it struggled to keep its widening fiscal deficit in check.

But the finance ministry said Riyadh was pushing back its target to balance the budget from 2020 to 2023. The move comes after the International Monetary Fund urged the government to scale back the pace of austerity measures to boost growth.

The economy fell into recession in 2017, contracting by 0.5 per cent because of lower oil output and weak confidence in the private sector, which depends on government spending and has been hit hard by the slowdown.

The finance ministry on Tuesday forecast growth would bounce back to 2.7 per cent next year.

“The government has decided that now it can spend more while keeping the deficit within the targeted limit and that it can achieve more non-oil revenue,” Mohammed al-Jadaan, the finance minister, told reporters. “That’s why balancing the budget has been postponed to 2023. We are not in a hurry.”