Iraq could issue $2bn of international bonds in the next three months if it can secure lower pricing, says Ali al-Alak, governor of the country’s central bank.

Baghdad abandoned a previous attempt to sell bonds to international investors after they offered a 11 per cent yield.

Iraq plans to borrow up to $16bn over two years. It is discussing loans with the Washington-based IMF ($6bn), the World Bank ($4bn) and the G7 group of industrialised nations ($3bn-$5bn), Al-Alak told UK news agency Reuters.

It could secure $7bn of this by the end of 2016, as well as World Bank or US guarantees on bond issuance.

This could reduce the yield demanded by investors to as low as 5-6 per cent, Al-Alak hopes.

Iraq is rated B-/B stable by the US’ Standard & Poor’s and B- by the US’ Fitch Ratings, below investment grade.

Iraqi 2028 bonds with a coupon rate of 5.8 per cent are now trading at about 70 cents on the dollar, resulting in a yield of 11.7 per cent, according to Reuters.

The country is struggling with a counter campaign against efforts by the jihadist group Islamic State in Iraq and Syria (Isis) to retake Mosul and political protests in the south over electricity cuts and corruption. Meanwhile, lower oil prices have affected government revenues.

Iraq’s real GDP contracted by 2.1 per cent in 2015, according to the IMF, while foreign exchange reserves fell to just $13bn.