Germany will provide 500 million euros ($566 million) worth of credit to Iraq to help it weather the sharp downturn in global oil prices, Chancellor Angela Merkel said on Thursday after talks with Iraqi Prime Minister Haider al-Abadi.
"Germany is ready to do what it can ... to stabilise Iraq in view of the big security challenges and economic challenges," Merkel told a joint news conference with Abadi, noting the impact of weak oil prices on the Iraqi state budget.
Merkel is under heavy pressure at home to do more to tackle Europe's migrant crisis, which has seen some 1.1 million people, including tens of thousands of Iraqis, arrive in Germany over the past year seeking refuge from wars and poverty.
The chancellor said Germany had not earmarked the credits for any particular purpose but said Iraq needed to rebuild its war-shattered infrastructure to give its citizens hope and to encourage them to remain in the country.
As well as the slump in oil prices, Iraq is also battling Islamic State militants who control swathes of territory in the north and west.
Iraq, whose income comes almost exclusively from oil sales, is struggling to pay its bills . The 2016 budget projects a 24 trillion Iraqi dinar ($20.45 billion) deficit financed largely by aid from international organisations such as the World Bank.
Baghdad is expected to need hundreds of millions of dollars to repair infrastructure in cities recaptured from Islamic State (IS) group with the help of airstrikes from the U.S.-led coalition, of which Germany is also a member.