Iraqi Kurdish leader Massoud Barzani declared that the "time has come" for the country’s Kurds to hold a referendum on statehood.

Iraqi Kurdish leader Massoud Barzani declared that the "time has come" for the country's Kurds to hold a referendum on statehood, his office said on Wednesday.

"The time has come and the conditions are now suitable for the people to make a decision through a referendum on their future," Barzani said.

"This referendum would not necessarily lead to (an) immediate declaration of statehood, but rather to know the will and opinion of the people of Kurdistan about their future," said Barzani, who has remained in power despite the expiration of his term as president.

Iraqi Kurdish forces are considered a key US partner in the war against the so-called 'Islamic State of Iraq and the Levant' (ISIL) takfiri group.

But both the referendum on independence - which Iraq's federal government opposes - and the issue of which areas it covers will raise tensions between the autonomous Kurdish region and Baghdad.

The region officially includes three provinces, but Kurdish forces now hold parts of four more over which the federal government wants to maintain control.

Both Baghdad and Kurdistan are facing a financial crisis due to plunging oil prices, on which they rely for the vast majority of government funds.

But the Kurds do not have the same access to the loans and bond markets that Baghdad can turn to in order to stay financially afloat.