* Reforms could include lower energy subsidiees * Petrochemical shares among the biggest fallers * Saudi index records steepest drop since late August * Egypt index steady after c.bank governor says will step down * Gulf markets downbeat By Matt Smith DUBAI, Oct 21 Saudi Arabia's share index made its largest decline in two months on Wednesday after an International Monetary Fund (IMF) official said the kingdom was considering a wide range of fiscal reforms in response to a record budget deficit. Other Gulf markets also fell, with renewed weakness in oil prices and mixed company results sapping investor confidence. Fiscal reforms in Saudi Arabia, which could include lower energy subsidies, could hurt corporate profits in some sectors, especially the petrochemical industry. Saudi Basic Industries Corp (SABIC), the Gulf's largest listed company, fell 3.7 percent as 19 of Saudi's 20 biggest stocks declined. The IMF estimated on Wednesday that the kingdom would post a record budget deficit of well over $100 billion this year, amounting to 21.6 percent of gross domestic product, as low oil prices shrink state revenues. This was a marginally larger deficit than the IMF had previously forecast. "The IMF report doesn't bode well for 2016 either," said Asim Bukhtiar, head of research at Saudi Fransi Capital. "The market is looking for clarity. In coming weeks we will learn official thinking on the 2016 budget, and right now the market is trying to gauge how big the spending cuts will be." Saudi Telecom Co plunged 7 percent after it reported a 31 percent drop in third-quarter profit that was bigger than analysts had forecast. This period included the annual Haj pilgrimage, which is usually a money maker for the Saudi mobile operator as foreign visitors use expensive international roaming or local mobile SIM cards while in country. The profit drop seemed to stun investors, who had lifted STC's shares to an 11-week closing high on Tuesday before its results were announced. Shares in Rabigh Refining And Petrochemical Co (PetroRabigh) tumbled 10.1 percent after the company swung to a third-quarter net loss. The Saudi stock index dropped 2.7 percent, its biggest decline since Aug. 24 and lowest close since Oct. 6. "The economy is having a significant wobble and that is affecting market sentiment," Bukhtiar added. In Egypt, Cairo's main index rose 0.1 percent after central bank governor Hisham Ramez's surprise decision not to renew his term when it expires in November. Ramez had devalued Egypt's currency and cracked down on black market currency trading, so investors will be pondering whether his exit will stall further devaluations. WEDNESDAY'S HIGHLIGHTS SAUDI ARABIA * The index dropped 2.7 percent to 7,479 points. DUBAI * The index fell 1.6 percent to 3,625 points. ABU DHABI * The index dropped 1.2 percent to 4,530 points. QATAR * The index fell 0.7 percent to 11,670 points. EGYPT * The index rose 0.1 percent to 7,669 points. KUWAIT * The index fell 0.2 percent to 5,793 points. OMAN * The index slipped 0.03 percent to 5,918 points. BAHRAIN * The index was flat at 1,249 points. (Editing by David Goodman)