* Sistani pushes for prosecution of corrupt senior politicians

* Ayatollah urges judiciary not to delay in pursuing reform

BAGHDAD, Sept 4 (Reuters) - Iraq's top Shi'ite Muslim cleric, Grand Ayatollah Ali al-Sistani, on Friday called for the prosecution of the most senior officials suspected of corruption and the retrieval of stolen funds.

Sistani, whose word few Iraqi politicians would openly challenge, has put his authority behind a recent reform drive by Prime Minister Haider al-Abadi and urged him to take a stronger stance against the corruption and mismanagement that have made Iraq nearly impossible to govern.

Abadi's initiative, proposed last month, eliminates entire layers of government, scraps sectarian and party quotas for state positions, reopens corruption investigations and gives the premier the power to fire regional and provincial bosses.

But critics have called the moves unconstitutional and said they will not improve the lives of ordinary Iraqis who have braved sweltering summer heat in Baghdad and southern provinces every Friday for more than a month to protest against poor services and corruption.

"One of the vital steps of reform is ... to pursue the major figures of corruption and hold them accountable, and to retrieve the stolen funds from them," Sistani said in a Friday sermon, delivered by his aide Ahmed al-Safi.

He also pointed a finger at Iraq's Integrity Commission, a government body tasked with fighting corruption, and to the judiciary, saying: "Many wonder if they are up to the task and if they will carry out this mission without any more delays."

Increasingly, street protests that were precipitated last month by widespread power cuts have evolved to demand the trial of corrupt politicians and reform of the judiciary, including the removal of Medhat Mahmoud, head of the Supreme Judicial Council, which oversees the court system.

Sistani also urged politicians to fix Iraq's economy.

The government's fiscal deficit is expected to reach double digits this year, battered by a slump in oil revenues and higher military spending, not least to try to drive Islamic State out of the swathes of northern and western Iraq that it controls.

"Weak economic planning and failure to establish a comprehensive strategy for providing financial resources to the country other than through oil revenues is a form of corruption," Sistani said.

(Reporting by Saif Hameed and Stephen Kalin; Editing by Kevin Liffey) ((stephen.kalin@thomsonreuters.com; +961 81639179; Reuters Messaging: stephen.kalin.thomsonreuters.com@reuters.net))

Keywords: MIDEAST CRISIS/IRAQ REFORMS