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Parliament Set to Address Budget Amendments Amid Rising Tensions Between Baghdad and Erbil

Budget Amendment Considered Amidst Financial Tensions Between Baghdad and Erbil

As financial and oil-related disputes escalate between Baghdad and Erbil, the House of Representatives is set to include a budget amendment proposal in the agenda for its upcoming session on Sunday. This action aims to mitigate the rift between the Kurdistan Region and the central government.

According to the Parliament’s Media Department, the agenda for session No. (2) of the first legislative semester of the fourth and final legislative year will consist of eight items, encompassing votes on five laws and readings of three others. Notably, the agenda will feature a vote on the draft law for the first amendment to the General Jalilifial Budget Law (2023, 2024, 2025), numbered (13) of 2023, as presented by the Finance Committee.

On the same day, the Ministry of Finance and Economy of the Kurdistan Regional Government revealed that the total receipts from Baghdad for 2024 would be only 10 trillion and 26 billion dinars. Moreover, around 822 billion dinars intended for the salaries of the region’s employees remain untransferred by the federal government.

Mukhtar Al-Mousawi, a member of the coordination framework, indicated that there is a consensus on expediting the vote on the budget amendment, suggesting it could resolve elements of the financial and oil dispute between Baghdad and Erbil. He further emphasized that this amendment would facilitate the process of sending budget tables for the year 2025 to Parliament.

In a recent session, the House of Representatives concluded the report and discussions regarding the second reading of the first amendment to the Federal Public Budget Law of the Republic of Iraq for the financial years 2023-2025, officially numbered (13) of 2023.

Tensions between the Kurdistan Region and the federal government have intensified recently, particularly concerning the ongoing salary crisis and the region’s financial entitlements. This situation has led to mutual accusations between both parties, with the Kurds threatening to withdraw from the political process due to the central government’s failure to disburse salaries and financial dues.

This salary crisis coincided with a visit from the President of the Kurdistan Region, Nechirvan Barzani, to Baghdad on January 12. During this visit, he conferred with Prime Minister Mohammed Shia al-Sudani and leaders from the State Administration Alliance, which comprises the coordination framework alleged to be obstructing legislative progress and constitutional compliance to resolve regional disputes.

The issue of regional employee salaries is one of the most significant ongoing challenges in relations between Erbil and Baghdad. The Iraqi government has reiterated the requirement that Erbil cedes its oil to Baghdad for export, a stipulation the Kurdistan government has consistently rejected. This disagreement has resulted in the federal government reducing salaries for many employees in the Kurdistan Region, with instances of salaries being delayed or distributed in an irregular manner since 2014. Payments ceased altogether in October 2017 following the secession referendum.

Employees in the region have endured a series of crises due to salary delays and the implementation of a compulsory savings system by the Kurdistan Regional Government, initiated under the austerity measures of former Prime Minister Haider al-Abadi. These financial disparities between Baghdad and Erbil have culminated in a severe economic situation.

On January 11, the Parliamentary Finance Committee noted that there was no agreement on amending Article 12 of the budget law, which pertains to the costs associated with the production and export of oil from the Kurdistan Region. This article proposes adjusting the price of the region’s oil to sixteen dollars per barrel, a contentious point subject to fluctuations.

The Finance Committee remains hopeful that further discussions with the Minister of Finance will resolve outstanding issues related to this amendment, particularly given the substantial political differences regarding the compensation mechanism outlined in the governmental proposal.

Recently, the Parliamentary Finance Committee convened to engage with Minister of Finance Taif Sami regarding the budget for 2025 and to ensure salary provisions for employees.

Masroor Barzani, President of the Kurdistan Regional Government, expressed dissatisfaction with Baghdad’s approach to the region, labeling it unjust and unacceptable. He emphasized the need for unity among the representatives of Kurdistan to assert their constitutional and financial rights, insisting that the residents of the region deserve better treatment.

Results from a population survey conducted on November 20 and 21, 2024, indicated that Kurdistan’s population comprises 14 percent of Iraq’s total population, which exceeded 45 million. The Kurdistan Regional Government has sought a 17 percent share of the federal budget since 2015 and aims for at least 46 seats in the Federal Parliament based on these demographics.

On November 27, 2024, the Kurdistan Regional Council of Ministers convened to address concerns regarding the failure of hundreds of thousands of residents in border areas to be recognized as part of the Kurdistan Region. The Council called on the federal government to rectify this situation and ensure proper registration within their corresponding areas.

Additionally, the Council of Ministers instructed its secretariat to send proposals to the Federal Council aimed at adjusting the population percentage allocated to the Kurdistan Region to ensure accurate financial representation for the fiscal year 2025.

The latest amendment to the budget law has integrated a clause concerning the production costs of Kurdistan’s oil, which was previously undervalued. Following discussions between the federal government and the Kurdistan administration, it was agreed to set the estimated cost at 16 dollars per barrel until a final determination is provided by the advisory committee responsible for evaluating production costs in coordination with relevant stakeholders, including regional production companies.

On November 26, 2024, further discussions took place within the Finance Committee regarding the draft of the first amendment to the Federal Public Budget Law for the financial years 2025-2024-2023. Emphasis was placed on the need for thorough data collection to facilitate the amendment process and cater to the requirements of both parties.

Finally, it is important to note that the current year’s budget has yet to be implemented, raising concerns among specialists regarding the government’s efficacy in financial management and its implications for the broader economic, investment, and political landscape. Ongoing debates regarding the region’s budget allocations arise annually, often tied to commitments surrounding oil exports, which have stalled since the cessation of operations through the Turkish port. Subsequently, Baghdad has begun facilitating salary payments to employees through precedential arrangements alongside the localizing of salaries based on the Federal Court’s rulings.

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