The International Monetary Fund (IMF) says it is engaging with Iraqi authorities as it prepares a new bailout programme for the country, whose economy has been battered by the war on Iran, AFP reports.

Iraq’s economy is heavily dependent on its energy exports, which almost entirely rely on transport through the strait.

Before the war, the country was already facing acute fiscal constraints, and the IMF this month forecast its economy would contract by 16 per cent this year.

“Our plan now is to engage with the authorities to understand better their priorities, how they want to address their vulnerabilities, and then to move ahead on how we can best support them with a programme,” says IMF spokesperson Julie Kozack at a regular press briefing in Washington.

Kozack cites the country’s severe financing constraints from before the outbreak of the war, and adds that its very narrow non-oil revenue base is also putting pressure on the fiscal balance.