"We have been really committed to paying this on time up until now. We are in discussions with the Kuwaitis, trying to defer the payment for two years or at least a year, to allow some space… to present a realistic budget," said Finance Minister Hoshiyar Zebari in an interview with Reuters.
For about two decades, Iraq has been paying reparations into a United Nations' organization, which supervises compensatory payments for the damage caused by the seven-month Iraqi occupation of the Gulf state. In this period, nearly $52.4 billion in reparations have been paid based on an allocation of 5 percent of Iraq's crude oil exports.
However, falling oil prices as well as the war with the Islamic State has exhausted the Iraqi budget. Baghdad admits that the country will not be able make the last installment next year.
According to the UNCC (UN Compensation Commission), the decision to delay the payment has not yet been made, since it needs approval from 15 member states of the UNCC's Governing Council.
"We are hearing the Governing Council will be considering the issue at a special session next week," the UNCC unnamed official told Reuters.
"There is an understanding. Next week there will be some hectic diplomatic activity between Baghdad, Kuwait, Geneva and New York in order to present a joint request to postpone the payment," said Hoshiyar Zebari stressing that the government seeks one-two years delay, that could provide Iraq with "some breathing space."
According to the International Monetary Fund, the Iraqi economy is shrinking and its budget deficit will most likely to reach 5 percent of GDP in 2014. Meanwhile Baghdad's international reserves have already diminished by $10 billion.