TEHRAN, Dec 30: Iran is set to loan one billion dollars to Iraq for reconstruction of the war-torn country, the official news agency IRNA reported on Saturday.

The Islamic republic will give Iraq a one-billion-dollar loan for reconstruction of this country, Economy Minister Davoud Danesh Jafari was quoted as saying by the economy ministry's public relations department.

The Iraqi side has committed to using Iranian contractors and experts for the infrastructure projects that will be defined through coordination with Iran, Danesh Jafari said, without giving details on the conditions of the loan.

Iran has signed an agreement with a visiting delegation headed by Iraq's Finance Minister Bayan Baqer Jabr al-Zubaidi to this end.

We are very happy to have signed this agreement only a few days after submission of the budget bill to the Iraqi parliament, Jabr al-Zubaidi was quoted as saying.

The loan would be allocated for construction and completion of power plants, roads, hospitals and schools, the Iraqi minister said.

Iran and Iraq fought a war between 1980-1988 but ties have warmed considerably since the fall of Saddam, with Tehran becoming one of the closest allies of the Shiite-dominated government in Baghdad.

Iraq's $20-billion reconstruction process has been hampered by violence, corruption and bureaucratic red tape, with nearly nine billion dollars going unaccounted for, according to US federal agency monitoring the work.

Earlier this year, Stuart Bowen, the special inspector general for Iraq's reconstruction, was quoted as saying the money was missing because of almost “non-existent oversight” by the Coalition Provisional Authority.

The entity governed Iraq in the aftermath of the March 2003 invasion.—AFP