The ongoing complexities surrounding the financial relationship between the Iraqi federal government in Baghdad and the Kurdistan Regional Government in Erbil have once again surfaced, particularly concerning the financing of salaries for public employees in the Kurdistan region. On Wednesday morning, the Federal Ministry of Finance explicitly held the Kurdistan government accountable for delays in salary disbursement, citing issues related to the localization of salaries and the identification of retired employees.
The ministry clarified its stance in a statement, emphasizing that it has been managing the salary funding process with the same rigor applied to federal ministries and governorates. The Ministry underscored, “The delay in salary payments, which we have reiterated, has a direct correlation to the Ministry of Finance’s interactions with the Kurdistan region and stems from a longstanding desire to implement the Federal Court’s decision effectively.”
Furthermore, the ministry highlighted that the region has yet to furnish it with the necessary data for localizing employees’ salaries across all banking institutions, not limited to government banks, as mandated by the Federal Court’s ruling. This requirement affects the treatment of regional employees in comparison with state employees, a point that the Ministry of Finance is rigorously adhering to.
The Federal Ministry of Finance attributed the salary delays to the region’s failure to segregate the names of employees who have retired. To address this issue, the Ministry deployed a team focused on accountability, budget, and retirement matters to work with the Kurdish authorities for over ten days. This team aims to sort through employee lists, identify retirees, and appropriately calculate pension entitlements in accordance with the amended Retirement Law No. 26 of 2019. It is estimated that over 29,000 employees may qualify for retirement, as detailed by regional representatives during a recent meeting in Baghdad.
Additionally, the ministry addressed the status of the Peshmerga forces, which are partially funded through the region’s allocations. These forces, previously classified as part of the federal ground forces, are expected to receive salaries through the Federal Ministry of Defense; however, there has been a persistent salary shortfall due to this funding dynamics that have been unresolved for over two years.
Moreover, the ministry reiterated the need for the region to disclose individuals drawing multiple salaries and provide a comprehensive view of regional salary laws. This transparency is essential to avoid redundancies and ensure accurate salary listings each month.
The Ministry of Finance further stressed the critical importance of salary localization to comply with the Federal Court’s decision, emphasizing that reliance on paper lists is insufficient for timely salary disbursement to eligible employees—a constitutional right guaranteed to all state employees. Reiterating its position, the Ministry dismissed claims that the delay was its sole responsibility, placing emphasis instead on the Kurdistan Region’s ongoing obligations.
Additionally, the finance department remarked that the monthly review of financial balances for December 2024 remains incomplete, attributed to inaccuracies in data entry by the regional authorities. Consequently, federal accountants are actively collaborating with their regional counterparts to rectify these inconsistencies.
The Ministry concluded its statement by affirming its commitment to ensuring salary payments to state employees continue through January, with the month still ongoing.
Recently, Rebas Maeran, the Undersecretary of the Federal Ministry of Finance, communicated the message from KRG President Masroor Barzani to Prime Minister Mohammed Shia al-Sudani. This communication centered on budgetary matters and the financial interplay between Erbil and Baghdad—a dialogue prompted by the challenges both governments face this year.
This dialogue coincides with an upcoming meeting scheduled for next Friday, involving representatives from the Kurdistan Regional Government and the Federal Ministry of Finance, led by Deputy Prime Minister and Chairman of the Economic Council Fouad Hussein.
On January 20, Ahmed Al-Hajj Rashid, a former Finance Committee member, indicated a lack of optimism regarding a swift resolution to the salary crisis in the region, citing the Kurdistan government’s failure to remit 50% of its internal revenues as a recurring issue.
Recent weeks have witnessed a heightened environment of tension between Baghdad and Erbil, underscored by a “data war” over salary allocations. Currently, salaries for December 2024 remain unpaid to Kurdish employees, with the Federal Ministry of Finance asserting that all allocated funds have been dispatched, while the Kurdistan government contends that the amounts received were inadequate—approximately 800 billion dinars short—hindering salary distribution for the month.
Additionally, on January 16, the Kurdistan Regional Government conditioned its internal revenue transfers to the federal government on receiving full benefits from the budget, beyond mere salary allocations. This stipulation emerged after deliberations with international representatives including ambassadors and consuls, amid ongoing disputes over budgetary appropriations, salaries, and oil revenues.
The salary crisis parallels the recent visit of Kurdistan Region President Nechirvan Barzani to Baghdad on January 12, where discussions with Prime Minister al-Sudani and leaders of the State Administration Alliance focused on the overarching challenges hindering resolution of intergovernmental conflicts.
Barzani’s visit was not solely aimed at addressing salary disbursements but sought to tackle broader issues affecting the relationship between the region and the federal government, including calls for enhanced transparency in resource management and the implementation of financial agreements.
Throughout his two-day visit, Barzani advocated for an amendment to the budget law to ensure equitable distribution of financial resources to the region and guarantee salary security.
While Kurdistan is allocated 21 trillion dinars from the federal budget, the cessation of oil exports has restricted transfers primarily to salary payments, leading the federal government to claim it fulfilled financial obligations to the region in 2024. In contrast, Erbil maintains that the sums received have fallen significantly short of required amounts.
The employees of the Kurdistan region have faced continuous crises over recent years, resulting in severe market disruptions due to salary delays and the enforced austerity measures introduced by former Prime Minister Haider al-Abadi’s administration. These financial discordances have culminated in widespread economic distress within the region.