Japan is seeking to extend tens of billions of yen in new loans to Iraq for a water purification plant in Samawah, the first major aid Tokyo has offered the city in about seven years, government sources said.

The new assistance to the city, where Japanese troops were stationed from 2004 to 2006 to help rebuild the war-torn country, is expected to help Iraq improve infrastructure despite financial difficulties caused by the rising cost of fighting the Islamic State group and a steep drop in oil prices, the sources said Saturday.

The government plans to step up talks with the Iraqi government to reach a broad agreement on the project by the end of March.

The security situation in Samawah is stable and expected to remain so, whereas some projects funded by Japanese official development assistance in northern Iraq and other parts of the country have been effectively suspended due to the Islamic extremists, the sources said.

The last major assistance Japan gave the city was a thermal power plant that was completed in 2008.

Samawah, the capital of Muthana province, remains less developed, and the sources say demand for the water treatment plant is high because it is the only provincial capital in the country without a full-fledged water purification facility.

The plant is expected to use Japan's leading water filtration technology to treat salty water taken from the Euphrates River. It will be capable of supplying more than 100,000 tons of drinking water daily, benefiting some 300,000 people living in the Samawah area, the sources said.