UPDATE 1-IMF says makes progess in Iraq program talks

WASHINGTON, Sept 11 - The International Monetary Fund and Iraq are in broad agreement on some areas of a new IMF program, including public financial management and the banking sector, an IMF spokeswoman said on Friday.

The spokeswoman told Reuters an IMF mission would continue talks with Iraqi authorities probably at the end of September or early October. Those talks would focus on a draft 2010 budget and reforms planned for the next two years.

"Good progress was made during the mission in late July, at which time there was broad agreement on the key macroeconomic parameters and structural reforms, especially in ... public financial management and the banking sector," she said.

Iraq has said it is seeking a $5.5 billion IMF program over 18 months, which would be the largest IMF financing agreement with the new Iraq administration. There have been two previous IMF arrangements of less than $1 billion each.

"To be able to frame the program, it will be very important to secure co-financing from other donors," the spokeswoman added.

The country relies on oil exports for more than 95 percent of state revenues and desperately needs funds to rebuild the country after years of sectarian conflict and insurgency triggered by the 2003 U.S. invasion.

Talks on an IMF program also come as the country courts foreign investors and an IMF program would give some credibility to the government's economic policies.