Five million people are expected to benefit from the work, which includes steps to stop leaking sewer pipes contaminating Baghdad's water supply, the Bank said in a statement Wednesday.

A 135,000 cubic metre reservoir will help the city cope with climate-induced droughts.

Sewerage pumping stations will be modernised to reduce the health risks of untreated wastewater discharged into the Tigris river, and about 130 kilometres of the water distribution network will be replaced.

"Water supply and sanitation have immediate and major impacts on the quality of life of citizens," Baghdad mayor Thikra Alwash said in the statement.

"We are committed to improving public services for the residents of Baghdad and to alleviating the burden households face on a daily basis in getting clean and reliable water supply."

Years of war and international sanctions under dictator Saddam Hussein took a heavy toll on the infrastructure of the capital, whose population has soared by 45 percent in three years.