June 21 (Bloomberg) -- Iraq, holder of the world’s third- largest oil reserves, may sell about $5 billion in bonds to finance infrastructure projects including construction of power plants and water-supply facilities, a government spokesman said.

The government approved a proposal to sell debt and is awaiting a positive response from parliament, Baghdad-based spokesman Ali al-Dabbagh said by telephone today.

Iraq depends on oil revenue for most of its income and is trying to increase production and sales. The country needs cash to rebuild its infrastructure following six years of conflict and, before that, economic sanctions.

General Electric Co., the world’s biggest maker of power- plant turbines, won an order valued at about $3 billion to provide electricity generating equipment and services to Iraq in December. Siemens AG, Europe’s largest engineering company, got an order valued at about 1.5 billion euros ($2.1 billion) for similar products.

The government may also propose a supplementary budget in September to increase spending should oil prices remain high enough, al-Dabbagh said. The Mideast nation approved a $59 billion budget in April, after cutting planned spending from an initial $79 billion because of the drop in oil prices.

Oil plunged while many oil-producing states were preparing their 2009 spending plans, falling about two-thirds in the six months after hitting a record $147.27 a barrel in July 2008. It’s since rebounded, closing at $69.55 a barrel on June 19, near an eight-month high.

Rising prices mean Iraq doesn’t yet need a loan of as much as $6 billion from the International Monetary Fund. Iraq agreed to initial borrowing terms with the IMF this month, which would give the nation access to funds for infrastructure should oil revenue prove insufficient.

Iraq is still in talks with the IMF about the loan, al- Dabbagh said. The initial agreement would provide for a five- year credit line with an interest rate of as high as 1 percent and an option to extend the borrowing by another 10 years, the Iraqi Finance Ministry said this month.

To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net

Last Updated: June 21, 2009 10:36 EDT