Iraq may need three years to rebuild and restructure its military, Prime Minister Haider Al-Abadi said on Sunday, as the country battles Islamic State militants who pose the biggest threat to its security since the fall of Saddam Hussein in 2003.

The ultra-hardline militant group seeking to redraw the map of the Middle East swept through the north last June virtually unopposed by the army, raising alarm bells among Baghdad's Western allies and in Arab capitals.

Corruption is widely blamed for the near collapse of the army, which received billions of dollars in support from the United States during the American occupation but has failed to stabilise Iraq, a major Opec oil producer.

Abadi acknowledged that creating a more effective army could be challenging while he fights Islamic State, seen as far more dangerous than al Qaeda, its predecessor in Iraq.

"The most difficult thing is to restructure and build the army while you are in a state of war," Abadi told Reuters in an interview during a visit to Cairo.

"Our aim is to create a balance between both, restructuring the army in a way that will not impact the fighting," added Al-Abadi, a British-educated engineer.

US-led air strikes have helped Iraqi military forces and their Shi'ite militia allies as well as Kurdish fighters seize back territory from Islamic State.

But the militants' effective use of suicide bombers and improvised explosive devices often slow down government forces.

"Restructuring the army could take three years," said Al-Abadi. "This does not mean that the fighting with Islamic State will last for three years."

US military officials say the conflict could last for years and that defeating the group hinges on Iraq's ability to create a more effective army.

In Cairo, Abadi discussed regional efforts to stamp out militancy and other issues with Egyptian President Abdel Fattah al-Sisi, whose country also faces Islamist militant insurgents based in the Sinai Peninsula who have pledged allegiance to Islamic State.

DRIVE TO END CORRUPTION

Al-Abadi has sacked army officers accused of corruption in his drive to reform the institution and stabilize a country that has suffered from Saddam Hussein's dictatorship, numerous wars and United Nations sanctions. He has told the defence minister to lead a probe into corruption within the military.

Since then the militants have been pushed out of several districts around Baghdad and near the Iranian border.

"The core issue for us is fighting corruption in the military and civil institutions because this will raise the efficiency of our military troops," said Al-Abadi.

"After taking some simple steps towards restructuring our army the ability of our troops to control and retake territory improved. We will continue this."

Widespread corruption was seen as one of the main reasons why the Iraqi army failed to stop Islamic State in battle. Many units were short of weapons or had soldiers listed on paper who were not actually present in the field.

Several Iraqi security officials estimate the number of functioning military forces at between seven and nine divisions. They caution even those are not all operating at full strength.

The Iraqi army had at least 14 divisions on paper before Islamic State toppled the north's biggest city of Mosul and soldiers deserted en masse.

Abadi said that in less than a month Iraqi government forces will launch an offensive against Islamic State militants in an attempt to retake Saddam Hussein's hometown of Tikrit, 160 km (100 miles) north of Baghdad.

In July, Iraqi forces withdrew from the militant-held city after meeting heavy resistance. Al-Abadi was less specific about Mosul.

"Mosul. I can't specify. Maybe the operation will be launched soon, faster than imagined. We don't want to advance to Mosul without planning. But Tikrit will be less than a month."

Al-Abadi also faces the challenge of easing sectarian violence: kidnappings and executions are common.

One of the toughest issues will be dealing with Shi'ite militias who have helped the government fight Islamic State but are accused by human rights groups of abuses.

The militias deny the allegations and say they act only against Islamic State militants.

Al-Abadi, a moderate Shi'ite, said he hoped to integrate up to 60,000 Shi'ite militias and armed Sunni groups into the army after the battle against Islamic State ends. – Reuters