Russia has begun selling a 10.9 percent stake in the world's biggest diamond producer Alrosa as part of a privatization drive aimed at raising much-needed funds to plug a widening budget gap.

In a statement released late Wednesday the mining giant announced it had started accepting offers for 802 million shares owned by the state.

The company said that the government would use the proceeds from the sale on "general budgetary expenses" as Moscow looks to bolster its cash flow in the face of falling revenue caused by the drop in oil prices.

On the basis of the company's share value on Thursday morning the stake is estimated to be worth some 54 billion rubles ($844 million).

Sources cited by Russian media have said the results of the operation will be made public on Monday.

Currently the Russian government has a 44 percent stake in the group based in the far-eastern city of Yakutia, while a further 25 percent is held by regional authorities.

A 16 percent stake was already floated on the stock market in 2013 but the move failed to generate as much cash as the authorities hoped.

Alrosa's share have gone up by around 34 percent since last December on the back of an overall improvement in international diamond prices.

Moscow decided at the end of 2015 to launch a huge program of privatizations to try to shore up its budget after the country plunged into economic crisis over the drop in oil prices and Western sanctions over Ukraine.

Stakes are also set to be sold off in oil producers Rosneft and Bashneft, with the state recently controversially grabbing back control of the latter.

Authorities are struggling to keep Moscow's budget deficit within three percent of GDP and the government is reportedly gearing up to announce some serious cutbacks.

Media have reported officials are set to freeze budget spending for three years, which business daily Vedomosti estimated as essentially being equivalent to a 20 percent cut by 2019 if inflation is taken into account.