The Iraqi army will need Kurdish fighters' help to retake Mosul, the largest city under the control of Islamic State, Iraqi Finance Minister Hoshiyar Zebari said, with the planned offensive expected to be very challenging.

Mosul, 400 km (250 miles) north of Baghdad, has been designated by the government as the next target for Iraq's armed forces after they retook the western city of Ramadi.

"Mosul needs good planning, preparations, commitment from all the key players," Zebari, a Kurd, said in an interview on Monday in Baghdad.

"Peshmerga is a major force; you cannot do Mosul without Peshmerga," he told Reuters, referring to the armed forces of Iraqi Kurdistan, an autonomous northern region close to Mosul.

The mostly Sunni city had a population of two million before it fell to the militants last June in the first stage of their sweeping advance through northern and western Iraq.

The battle of Mosul would be "very, very challenging", Zebari said. "It will not be an easy operation, for some time they have been strengthening themselves, but it's doable."

Given the extent of the area that needs to be secured around Mosul during the attack, the army may also need to draw, in support roles, on local Sunni forces and possibly the Shi'ite Popular Mobilization, he said.The Mobilization, known in Arabic as Hashid Shaabi, is a loosely knit coalition of Iran-backed Shi'ite militias set up to fight Islamic State. It was barred from the week-long battle to retake Ramadi to avoid tension with the Sunni population.

The retaking of Ramadi by Iraq's army marked the first major success of the US-trained force that initially fled in the face of Islamic State's advance 18 months ago.

Prime Minister Haider al-Abadi said on Monday that Islamic State would be defeated in 2016 with the army planning to move on Mosul.

"We are coming to liberate Mosul and it will be the fatal and final blow to Daesh," he said in speech praising the army's "victory" in Ramadi

Retaking Mosul would effectively mark the end of the caliphate proclaimed by Islamic State in adjacent Sunni areas of Iraq and Syria, according to Zebari. "It's there where Abu Bakr al-Baghdadi declared his caliphate," he said, referring to the group's leader.

"It is literally their capital."

The Iraqi Kurdish president, Massoud Barzani, discussed plans for the liberation of Mosul with Lieutenant General Tom Beckett, Britain's senior defense adviser, in September, according to Kurdish TV Rudaw.