The United States embassy in Iraq is to increase its reliance on local goods and services as part of efforts to cut the size of its mission, the largest in the world, a top State Department official said on Wednesday.

Deputy Secretary of State for Management and Resources Thomas Nides told reporters during a visit to Baghdad that as part of such efforts, "we'll look at the contract piece," specifically "purchasing more local goods and services."

"We're basically telling our contractors we expect them to source more of the food internally than bringing it over the border, and so that will obviously lessen our dependence on some of the contracts," Nides said.

"We have a very much aggressive hire ... Iraqi programme, meaning that we're being very clear not only to our contractors but even here for our staff to begin to localise much of our operations," he said.

Contractors, he said, have been given targets to reach.

"It will always be a very large embassy. Now the question is, can you fine-tune it, can you shrink it," Nides said.

He noted that the budget request for 2013, at some $4.8 billion, is down about 10 percent.

"I think you've seen the high water mark for funding, at least for Iraq, for operations and assistance," he said.

Nides also said the US will look at various programmes in Iraq, and its facilities in the country.

"If you're looking at a kind of a pyramid of needs ... first you look at your programmes," which "most people think are ... not only adequate, but beyond adequate," Nides said, referring to political programmes, the economic section, the police training programme and a "large management section."

"You have to then see, okay, what are the numbers, or do you feel good about the numbers of people doing that," he said.

And "the second thing we'll assess is the footprint -- you know, we have a lot of space," he said. "We have to look at the different physical locations we have."

The planned cuts represent a major U-turn in State Department planning.

Less than a year ago, US Ambassador James Jeffrey outlined plans to boost the size of the embassy in preparation for the departure of troops and the expected growing influence of neighboring Iran.

All US troops except for a small number under US embassy authority departed Iraq in mid-December last year, bringing to an end America's almost nine-year war in Iraq.