Japan has agreed to lend Iraq up to $195 million for a project to help repair a thermal power station in the southern province of Basra, an Iraqi government statement said on Saturday, according to a Reuters report.

The loan was signed during a visit to Iraq by Japan's State Minister for Foreign Affairs, Kentaro Sonoura, who met Prime Minister Haider Al-Abadi on Saturday, the prime minister's office said in a statement.

Iraq needs external financing to plug a budget deficit of approximately 25 trillion Iraqi dinars ($21.44 billion) for this year as it grapples with lower global oil prices and costs associated with the fight against Daesh, the agency added.