SULAIMANI, Kurdistan Region — This report investigates the Kurdistan Region’s failure to pay full 12-month salaries to civil servants, security personnel, and pensioners, offering an in-depth analysis of its financial allocations under Iraq’s budget law, funds transferred from Baghdad, and the Region’s associated rights and obligations.
Under Iraq’s three-year dget law, a total of 11 trillion and 576 billion dinars has been allocated for salaries in the Kurdistan Region for 2024, amounting to 964 billion dinars per month.
Over the year, Iraq sent 10.75 trillion dinars for 11 months of salaries for the Kurdistan Regional Government (KRG), leaving 826 billion dinars with the Iraqi Ministry of Finance for the 12th month’s salaries.
Iraq has transferred funds for 11 months’ worth of salaries, but the Kurdistan Region has only distributed 10 months’ salaries, despite most of the funds being sent by Baghdad more than two weeks ago.
According to an analysis by Zoom News, the Kurdistan Region currently has 1.8 trillion dinars available for salaries and is able to distribute the November salaries.
The Kurdistan Region’s Ministry of Finance announced Thursday that November salaries for civil servants and security personnel will be paid next week, contingent upon the disbursement of funds from the federal government.
A Federal Court ruling in February stipulated that the rights of salaried workers should not be turned into a political conflict, among other conditions. However, the Kurdistan Region must comply with the demands outlined by Iraq in the budget law to receive the necessary funds.
The Kurdistan Region is required to return 50% of federal revenues to Baghdad. According to the Ministry of Finance, 50% of the federal non-oil revenue amounts to approximately 80 billion dinars.
Since February, following the Federal Court’s ruling, the Kurdistan Region has been sending its revenue directly to Baghdad, and welcomed the Court’s move.
However, following the February ruling, the Kurdistan Regional Government (KRG) has sent only five months’ worth of domestic revenue to Baghdad in 2024, totaling 400 billion dinars, which is half of the non-oil revenues. However, it has not returned the revenues for the remaining six months.
The Iraqi Ministry of Finance has expressed concern that the Kurdistan Region has sent only about 400 billion dinars. In response, the Kurdistan Regional Government delegation traveled to Baghdad and requested that the Iraqi Ministry of Finance refrain from pressuring them to send domestic revenue, as they have allegedly spent the revenues.
Based on this basis, a delegation from the Kurdistan Regional Government and Baghdad decided that the domestic revenue for July and August, amounting to 160 billion dinars, would be sent to Baghdad. However, the Kurdistan Region did not fulfill its commitment, failing to return the revenue as promised.
The domestic revenue for the last four months of the year is estimated at 80 billion dinars per month, totaling 320 billion dinars. The Kurdistan Regional Government (KRG) delegation has requested that the revenue for these four months be included as a loan in the 2025 budget. Meanwhile, Iraq is now demanding the two months’ worth of domestic revenue that the Kurdistan Region has not sent, further complicating the disagreements.
Another dispute between Baghdad and Erbil has arisen over salary banking. While Baghdad insists on using federal banks for salary distribution, the Kurdistan Region continues to use its own “My Account” project, which involves commercial banks licensed by the Central Bank of Iraq. Throughout 2024, more than 700,000 employees, or about 70% of the region’s workforce, will participate in the “My Account” project.
Another issue between Baghdad and Erbil is oil. The Kurdistan Region is required to return the revenue from the oil it sells to Iraq. Following the suspension of oil sales via Iraq-Turkey pipeline on March 25, 2023, the Kurdistan Region agreed with Iraq to export oil through Iraq’s channels.
In the first two months of 2024, the Kurdistan Region exported 80,000 barrels of oil per month through Iraq, but it later halted the exports.
Regarding the suspension, the Kurdistan Region stated that Iraq is not providing funds to companies for their operations, which is why it has decided not to send the oil exports.
Iraq responded the Kurdistan Region that despite the Federal Court’s decision, the Region had not implemented the required points. As a result, the salary payments will not be transferred the Region on time.
According to officials of the Kurdistan Regional Government, the Region has a monthly domestic revenue of 320 billion dinars, which is solely derived from non-oil revenue.
The Kurdistan Region also generates oil revenues, selling approximately 300,000 barrels of oil daily through tankers. Iraq is aware that this revenue does not return to the general treasury of the Kurdistan Regional Government. Several reports and investigations have indicated that the revenue from oil sales is not being transferred to the Ministry of Finance as required.
Some of these oil tankers are allocated to domestic fuel fields and refineries, while others are sold abroad. However, the revenue from these sales does not go to the public treasury. It is widely reported that this revenue is instead directed to the treasury of the two ruling parties, the PUK and KDP.
Regarding the domestic revenue of 320 billion dinars, if the Kurdistan Region pays 80 billion every month to Iraq, approximately 240 billion will remain. The Kurdistan Region has expressed concerns, stating that this money is not in cash form and is difficult to use. They have suggested either allocating it to projects or using it for salar shortfalls.
According to the latest 2024 budget, the Kurdistan Regional Government (KRG) has informed Iraq that it requires about 914 billion dinars monthly for salaries. However, the Kurdistan Region has gradually increased its salary list month by month, now equating it with the salaries of Iraqi pensioners, resulting in an additional 56 billion dinars.
Even if the salary equalization reaches an additional 70 billion dinars, the Ministry of Finance still requires 996 billion dinars monthly. There is a view that this increase is tied to the fact that the PUK and KDP have employed their own supporters, contributing to the rise in salary costs.
In addition, the Region receives more than 20 billion dinars monthly from the coalition forces for the Peshmerga forces.
The Iraqi delegation told the Kurdistan Regional Government (KRG) delegation that the Kurdistan Region should not implement the pension law independently, as it has its own mechanisms. They emphasized that it is not within the authority of the Kurdistan Regional Government to make such decisions, and that the issues need to be resolved through collaboration.
The Kurdistan Region does not have a pension fund, and there is no money allocated to it. However, every month when salaries are paid to employees, a portion of their salaries is deducted for the pension fund, with the expectation that these funds will be available when they retire.
The KRG needs about 996 billion dinars monthly for payroll, which totals roughly one trillion dinars monthly, or 12 trillion dinars for the year. However, the allocated amount is only 11.5 trillion dinars, creating a shortfall of 50 billion dinars each month for the next 12 months. This poses a significant problem for the Region’s financial planning.
The solution is to increase the funds for all 12 months by about 500 billion dinars for 2025, depending on the outcome of the negotiations between the Kurdistan Region and Baghdad.
The Kurdistan Regional Government (KRG) has sold about 300,000 barrels of oil per day this year, with approximately 50,000 barrels allocated for companies’ expenses. The remaining 250,000 barrels are sold illegally, at lower market prices, typically around $30 per barrel. This results in about $225 million in oil revenue per month, which does not go back to the government but instead fills the pockets of the two ruling parties, the PUK and KDP.
By 2024, the revenue from oil sales via tankers is estimated to have reached around $2.7 billion, which would be enough to cover the salaries of employees for four months. However, civil servants, pensioners, and security personnel in the Kurdistan Region have entered the new year uncertain about the fate of their November and December salaries.
