UPDATE 1-IMF, Iraq aim for loan deal in 'coming weeks'-IMF

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ISTANBUL Oct 6 (Reuters) - Talks between the International Monetary Fund and Iraq on an IMF-funded loan programme were making progress and the sides are aiming to reach an agreement "in coming weeks," an IMF spokeswoman said on Tuesday.

IMF and Iraqi officials met on the sidelines of IMF and World Bank meetings in Istanbul and have planned further discussions, the spokeswoman said. Iraq has said it is seeking a $5.5 billion IMF programme.

"We made good progress in Istanbul," the spokeswoman said. "Discussions will now continue, with the aim of reaching a staff-level agreement in the coming weeks."

Mudher Salih Kassim, senior advisor to the Iraqi central bank, last week expressed concern that Iraq will not be able to meet IMF conditions for the loan.

The country relies on oil exports for most of its state revenues and desperately needs funding to rebuild its economy after years of sectarian conflict and insurgency triggered by the 2003 U.S. invasion.

An IMF program would signal confidence in the government's economic plans as the country also courts foreign investors.

(Reporting by Lesley Wroughton; editing by John Stonestreet)