The Iraqi budget outlook appears more stable given the recent rise in oil prices above $70 a barrel, the governor of the Central Bank of Iraq said.

"Because of the dependence of Iraq's economy on the oil sector, it is very important that oil prices are back to a respectable level," said Sinan Al Shabibi.

Iraqi has slashed its 2009 budget three times this year due to falling oil prices. They topped out about $150 just over a year ago, slumped below $40 this year, then rallied above $70.

"The situation now is not how much resources you have for the budget but the implementation side," said Al Shabibi on the sidelines of a gathering of central bankers, analysts and academics from all over the world organised by the Federal Reserve Bank of Kansas City.

Asked whether interest rates, which the central bank cut to seven per cent from nine per cent in June, could be cut further, he pointed to the bank's recent success in reining in inflation. The rates outlook "depends on development and inflation and we are happy to say we controlled inflation or lowered the core inflation… and this is actually what drives the interest rate", said Al Shabibi.

Iraq's most recent inflation figures show a rate of 7.9 per cent in July, down from about 12 per cent in 2008.

"We had a lot of discussion with the International Monetary Fund and we are more likely to go for another programme," he said.

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