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Saudi Arabia is battling to stem the impact of low oil prices by injecting its banks with 20 billion riyals ($5.3 billion).

The kingdom's central bank, the Saudi Arabia Monetary Agency, announced it would boost banks with time deposits "to support financial stability".

The move is the latest step to strengthen the Middle East's largest economy as the plunge in oil prices hits government revenue and the volume of petrodollars flowing into the Saudi banking system.

The Saudi Interbank Offered Rate, a key benchmark for pricing loans, has surged to its highest level in seven years after the drop in oil prices forced the government to withdraw money from the country's banking system, squeezing liquidity.

That in turn has threatened the banks' ability to lend to businesses at affordable rates - a key consideration as the government tries to limit damage to the country’s economic growth from cheap oil.

The economy will likely expand 1.1 percent in 2016, according to a Bloomberg survey, the slowest pace since 2009.

Riyadh is said to be reviewing thousands of public projects that come to a combined value of around $69 billion, with a view of cancelling a third of them, as a result of its budget deficit.

A plan is also said to be in place that may result in the merging of some Saudi government ministries.

Oil prices rallied on Monday as OPEC leaders met in Algiers with an aim to agree on oil production levels to counteract the effects of a global glut.