The Public Distribution System for food rationing was established in 1995 under the U.N. oil-for-food program in the aftermath of the invasion of Kuwait. Corruption and a lack of effective governance have hobbled the program since the U.S.-led invasion of Iraq in 2003, however.

The Trade Ministry, which runs PDS, said in 2007 it was looking to cut the food allocation in half, but later secured $3.7 billion in government funding for 2008 to keep the program going.

The ministry in 2008, however, said it would diminish the program further as Iraq faces economic pressure for 2009. Declining oil prices and a faltering world economy put strains on the war-torn country.

Planning Ministry spokesman Abdul Zahra al-Hindawi said his offices are working with government officials in Baghdad to cut the cost of the program by eliminating aid for all but the poorest families, the U.N. humanitarian news agency, IRIN, said.

"It will benefit the Iraqi economy when money goes only to buy food for those who need it," Hindawi said.

The Trade Ministry said around 60 percent of the Iraqi population relied on the PDS program as its only source of food during the Saddam Hussein era.