Iraq, pressured by lower-than-expected oil prices, will cut non-oil spending in its 2016 budget by 15 percent and take on several billion dollars in international debt, it said in a memo which the International Monetary Fund released on Thursday.

Opec's second-largest producer, which relies on oil exports for nearly all its revenue, has sought donor support amid a collapse in global crude prices and a costly war against Islamic State militants that has displaced more than 3.4 million people.

Iraq's parliament in December approved a 2016 budget of 105.8 trillion Iraqi dinars ($90 billion), with a deficit of 24 trillion dinars.

The government now expects the deficit to narrow to $4.9 billion in 2016 and then to $13.2 billion during 2017-19, it said in a June letter to the IMF requesting a Standby Agreement (SBA).

The IMF approved the SBA last week, granting access to an initial tranche of $1.9 billion in loans.

Iraq said other financing sources for this year's deficit would include more than $2 billion in loans from the World Bank, partially guaranteed by France, the United Kingdom and Canada, and over $3 billion in loans from the United States and other lenders.

The authorities will also rely on a $1 billion bond with full guarantee of the United States and $1 billion Eurobond issuance in the last quarter of 2016.

Iraq last sold international debt in 2006, when it issued about $2.7 billion of bonds due in 2028 with a coupon of 5.8 percent.

The government plans to draw down its foreign exchange reserves over the next few years to help supplement that financing. It projects they will bottom out at $31.5 billion in 2020 from $59 billion in October.

Iraq also told the IMF it was committed to "a gradual elimination of the existing stock of outstanding arrears" to international oil companies by the end of 2016. Arrears were estimated last year at several billion dollars.

The government said in the memo it would implement a public hiring freeze in most sectors, reform pensions and impose electricity tariffs in order to increase revenues.

Iraq's economic activity had contracted by 2.4 per cent in 2015 but was expected to grow by 10.3 per cent this year, it added.-Reuters