KRG Struggles to Pay Salaries Amidst Oil Export Suspension
Shafaq News/ The Kurdistan Regional Government (KRG) is facing challenges in paying the salaries of its employees as it finds itself unable to rely on local revenues solely.
According to the Kurdish Minister of Finance and Economy, Awat Janab Noori, the KRG received a monthly sum of 720 billion dinars from oil revenues, which had previously covered 80 percent of salary expenses, with the remaining amount sourced from local revenues. However, local revenues alone have proven insufficient to meet salary payments.
The financial crisis in the KRG arises from an arbitration case filed by the Iraqi government with the Arbitration Board of the International Chamber of Commerce in Paris against Turkey concerning crude oil exports from the Kurdistan Region through the Turkish port of Ceyhan without the involvement of the Iraqi Oil Marketing Company "SOMO."
As a result of the arbitration decision, the export of Kurdistan's oil, which amounted to 480,000 barrels per day, has been suspended since March 25 and has not yet resumed. The broken flows represent only about 0.5% of the global oil supply.
The Iraqi draft budget law for 2023 stipulates that Iraq must export 3,500,000 barrels per day, including 400,000 barrels from Kurdistan, at a rate of $70 per barrel, with a significant portion of it being shipped via the Turkish port of Ceyhan.
Minister Noori expressed severe concern over the financial crisis, stating that the KRG cannot cover salaries from local revenues alone. He hoped the Iraqi government would take necessary actions to resume Kurdistan's oil exports, thereby generating additional revenue for the Region.
To address the urgent issue, a KRG delegation is set to visit Baghdad to engage in talks with the Iraqi government. Successful resumption of oil exports could alleviate the financial crisis in the KRG, allowing for timely salary payments.
The inability to pay salaries solely from local revenues could significantly impact the economy and stability of the Kurdistan Region, as a considerable number of citizens rely on government salaries for their livelihoods. This situation may lead to widespread unrest and discontent.
During his visit to the Parwezkhan border crossing on Sunday, Minister Noori emphasized that domestic revenue is insufficient to cover salary expenses. He directed inquiries about salaries to the Iraqi Ministry of Finance.
The oil issue has been a longstanding tension between Baghdad and Erbil. While the Iraqi government claims that all oil produced in Iraq belongs to the federal government, the Kurdistan Regional Government argues that it has the right to export its own oil.
In a positive development, in April 2023, Baghdad and Erbil signed a temporary agreement to restart the KRG's oil exports. Under the agreement, Iraq's state-owned marketing company SOMO will market and export KRG oil, with revenues being deposited in an account at the Iraqi Central Bank under the control of the KRG.
