Iraqi Kurdistan on the verge of economic collapse
A massive demonstration in Duhok against the Iraqi federal government in September 2023. Photo: AFP
Baghdad (IraqiNews.com) – Due to the financial situation in the Kurdistan region of Iraq, which has been made worse by the government’s months-long inability to pay civil servants, many businesses have closed throughout Erbil.
Iraqi Kurdistan is facing a financial crisis due to the suspension of oil exports to international markets after Iraq won an arbitration case against Turkey.
The federal government in Baghdad is facing issues with the Kurdistan Regional Government (KRG) related to the salaries of employees in the KRG, with fears of protests and security unrest.
Tension escalated with the Federal Supreme Court’s decision to prevent the transfer of salaries to Iraqi Kurdistan employees based on a lawsuit from an MP in Basra.
The step sheds light on an old crisis between the federal government and the KRG, where an agreement was reached regarding transferring the region’s revenues to Baghdad in exchange for the salaries of the KRG’s employees.
Iraq’s general budget law, which was approved by the Iraqi Parliament earlier in 2023, stipulates that the Kurdistan region of Iraq is obligated to hand over its revenues to the state in exchange for the commitment of the federal Ministry of Finance to pay for Iraqi Kurdistan’s dues every month.
The agreement between the federal government and the Kurdistan region of Iraq has not been fully implemented, leading to issues with the salaries of employees in the KRG.
The second issue that the two parties did not agree on is the discrepancy in the cost of oil production between companies operating in Iraqi Kurdistan and the ones operating in the rest of the Iraqi governorates.
The federal general budget law 2023-2025 sets the cost of producing and transporting each barrel of oil at $6.9, while data from the Ministry of Natural Resources in the KRG shows that the cost of oil production in Iraqi Kurdistan is $32.91.