"Our proposals include allocating three percent of Iraq's oil export revenues to help them meet their needs," Abdul-Khaliq Zankana, a Kurdish lawmaker and head of the parliamentary committee for displacement and immigrants, told IRIN in Baghdad.
The committee made the proposals in late May after visiting and interviewing Iraqis in neighbouring countries earlier this year.
"Other proposals include distributing food rations to the refugees, giving them social protection network funding and allocating funds from the education and health ministries' budgets to help those who cannot afford education and health services, especially for their children," Zankana added.
"They are living in harsh conditions as their situation is deteriorating," Zankana said, without specifying when parliament would consider the bill.
"We realise that even if we were to set aside US$500 million, this would not be enough, but as a parliament and government we are committed to helping to alleviate their suffering because they left Iraq against their will due to escalating violence," he added.
Iraq exports about 1.6 million barrels per day and last year oil exports brought in $31.2 billion.
In its 2006 Global Trends report released on 19 June, the UN Refugee Agency (UNHCR) said that people fleeing Iraq had swelled the ranks of the world's refugees, reversing a five-year decline, and causing an increase in the number of those driven from their homes for the first time since 2002.
As of the end of 2006, the world had 9.9 million refugees, a 14 percent increase on the 8.7 million refugees recorded in 2005, the UNHCR report said. The current total is the highest since 2002, when there were 10.6 million refugees.
The report said the increase was largely due to the situation in Iraq, where by the end of 2006 1.5 million had fled the country to seek refuge in other countries, particularly Syria and Jordan.
Host countries have complained of shouldering the burden while Iraq spirals further into turmoil. Iraqi refugees say they are struggling to legalise their residence and find work in host countries.
"The situation in Iraq continues to worsen, with more than 2 million Iraqis now believed to be displaced inside Iraq and another 2.2 million sheltering in neighbouring states," the UNHCR statement said.
According to government figures, some 1.4 million Iraqis are now in Syria, up to 750,000 in Jordan, 80,000 in Egypt and some 200,000 in the Gulf region. Syria alone receives a minimum of 30,000 Iraqis a month.
"The number of Iraqis fleeing to neighbouring countries remains high," the UN agency said. "Calls for increased international support for governments in the region have so far had few results."