By Saif Hameed

BAGHDAD, March 10 (Reuters) - Iraq's central bank said it plans to sell 1.5 trillion Iraqi dinars ($1.27 billion) in two-year government bonds, as part of an effort to plug a deficit caused by tumbling oil prices and the costs of fighting an Islamic State insurgency.

It will be the first such sale to the public since 2003, when Saddam Hussein's regime was overthrown, and is the first tranche of a 5 trillion-dinar bond plan announced in January, central bank media relations official, Acer Jabbar, said.

Iraq already issues Treasury bills to domestic banks and has international bonds outstanding.

The new issue, carrying a 6-percent interest rate, will be sold between March 15 and April 15 to the public and to local lenders, an emailed statement from the bank said. ($1 = 1,178.0000 Iraqi dinars)

(Reporting by Saif Hameed; Writing by Maher Chmaytelli; Editing by Louise Ireland) ((;))