Iraq and the World Bank signed a $350 million loan agreement on Sunday (July 12) to fund emergency reconstruction in towns recaptured from Islamic State militants
According to a Baghdad official, the deal marked the first international help to rebuild areas devastated by war.
Finance Minister Hoshiyar Zebari said around a third of the money would go towards repairing roads and bridges, with a similar amount allocated towards restoring electricity networks, water and sewage.
Iraq faces a budget deficit of up to $20 billion this year as it grapples with low oil revenues and the heavy cost of war with Islamic State insurgents - a crisis which the bank says may be the gravest yet in a country beset by decades of conflict.
The militants hold much of north and west Iraq, but have been driven out of parts of Diyala and Salahuddin provinces north of Baghdad by Shi'ite militia, Kurdish peshmerga and Iraqi security forces, backed by U.S.-led air strikes.
The extensive damage from those battles has left the Iraqi government, whose revenues have been battered by the halving in world oil prices, appealing for international help.
"This is the first direct tangible assistance for the reconstruction and stabilisation efforts by the government to normalise life in the areas liberated from ISIS," Zebari said at a signing ceremony in Baghdad, referring to Islamic State.
He said Sunday's deal granted Iraq a 15-year loan with approximately 1 percent interest rate and a 5-year grace period.
Iraq has also received pledges of financial support for a government reconstruction fund from the United States, European Union, Japan and individual European countries, Zebari said, but Sunday's loan was the first to materialise.
Iraqi forces recaptured the city of Tikrit, hometown of Iraq's former leader Saddam Hussein, three months ago.
But extensive damage and leftover bombs, as well as Sunni residents' fear of retribution from mainly Shi'ite fighters who retook Tikrit, mean only 4,000 families have returned so far.
A World Bank document setting out the aim of the loan stressed the importance of providing speedy assistance, saying there was a need to restore basic services.
The World Bank is also preparing a separate $1 billion loan to help Baghdad deal with its budget deficit.
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