DUBAI: Iraq's government plans a domestic issue of $5 billion worth of bonds starting in the fourth quarter of this year as it seeks to relieve the pressure of low oil prices on its finances, an official told Reuters on Monday.

The medium-term notes, with maturities of between 12 and 18 months, will help to finance the budget deficit and be open to local banks, other institutions and retail investors, said Mudher Saleh Kasim, a former senior central bank official who advises Prime Minister Haider Al-Abadi on financial policy.

Through years of conflict and upheaval, Iraqis have become used to hoarding large sums of foreign currency in their homes. The bond issue will seek to tap this hoard.

"It gives a unique opportunity to a group of investors who are cash-rich and essentially hoarders," Kasim said. "We think there will be good demand for investment."

The bonds will be denominated in US dollars and issued in stages, according to investor demand.