DUBAI — Iraq’s cabinet agreed to earmark$500 million from its national budget to resolve a dispute with Kuwait over debts of Iraqi Airways, reports quoted Iraqi State Minister Ali al-Dabbagh Thursday.



The cabinet asked parliament to approve the allocation of $300 million from the 2012 budget and another $200 million the following year, Al-Dabbagh was quoted by Bloomberg news as saying.



Prime Minister Nouri Al-Maliki announced an agreement with Kuwait to end the dispute in March.



State-run Kuwait Airways Corp. has been seeking $1.2 billion in compensation for 10 aircraft taken during former Iraqi President Saddam Hussein’s invasion of Kuwait in 1990. Maliki agreed to pay $300 million in compensation to the carrier and another $200 million to establish a joint airline with Kuwait, which will contribute a similar amount, Bloomberg said. Iraq still owes Kuwait about $20 billion as a result of that invasion. It is paying into a United Nations compensation fund even as its economy tries to recover from decades of conflict, sanctions and sabotage, nine years after the US-led invasion that ousted Hussein. — Agencies