Kurdistan PM stresses reform, resolving Baghdad disputes to face economic crisis

ERBIL (Kurdistan 24) – Kurdistan Region Prime Minister Masrour Barzani on Friday stressed that his administration would continue its robust plans for economic reform and dialogue with federal Iraqi authorities in Baghdad as key strategies in efforts to tackle ongoing financial hardship faced by the autonomous region.

“The whole world, including the Kurdistan Region, is going through a difficult economic period due to the implications of the outbreak and falling oil prices,” Barzani said in a speech addressing the public. “These are challenging times for the Kurdistan Regional Government. From the outset of this economic crisis, we have been doing our best to ease the financial burden on people throughout our region.” 

He added that, since the disease first broke out, his cabinet had made continual efforts to ease its impact on the lives of citizens amid a series of crises that have further exacerbated the ability of the Kurdistan Regional Government (KRG) to pay its public sector employees.

Erbil-Baghdad ties

Primary among ongoing disputes is the federal government transfer of KRG’s share of the national budget and Erbil’s handover of 250,000 barrels of oil per day to Iraqi state oil marketer SOMO, as outlined in an agreement between the two sides that was recently renewed in late 2019 but never implemented. In late April, Baghdad froze monthly payments to Erbil of its budget share that was being used to pay government salaries.

The prime minister asserted that, since he took office in July 2019, his cabinet had upped efforts to “resolve” long-standing disputes with Baghdad.

He explained that the KRG and the federal Iraqi government were making progress before Prime Minister Adil Abdul Mahdi was forced to resign amid ongoing anti-establishment protests in central and southern parts of the country.

“From then on,” said Barzani, the caretaker government of Abdul Mahdi “did not take full responsibility to resolve outstanding issues, including Kurdistan Region’s constitutional rights and entitlements which they have failed to deliver since 2005.” 

He was quick to point out, however, that since former Iraqi spy chief Mustafa al-Kadhimi took the helm as the federal premier, Erbil has reaffirmed its readiness to address the lingering disputes. Top KRG delegations have visited Baghdad for three rounds of talks with top government officials and political leaders, he added.

Related Article: KRG delegation heads back to Baghdad for talks on oil, budget freeze

“Dialogue will continue until we reach a fair and constitutional solution to these problems,” the prime minister affirmed.

Economic Hardship

Barzani continued, “This financial crisis makes us even more committed to the strategy of diversifying our economy and the ongoing the reform process, as well as putting an end to historical issues regarding public administration and finances.”

Related Article: KRG investment board plans to diversify Kurdistan Region economy

“We therefore support decentralization in a way that continues to protect the integrity of the Kurdistan Region.”

He went on to say that, since his inauguration, the KRG has missed one month of paying its employees, precipitated by an extremely difficult financial situation. “We have also taken a number of steps to reduce the burden on low-income families,” and others whose conditions have been significantly affected by the strict curfew measures and economic shutdown enacted to limit the spread of COVID-19.

The premier explained that KRG is $27 billion in debt, but that most of this is due to “the failure by previous Iraqi federal governments to allocate correctly the budget of the Kurdistan Region. As a result, unfortunately, the government holds little or no reserves, forcing us to depend on revenues received monthly.”

Out of $700 million monthly income from oil sales before a sharp decline in prices starting in April, KRG was expending $400 million of it in various costs associated with the production and sale of the commodity, Barzani said. The remainder, along with $383 million from Baghdad, would reportedly be used to pay public servants' a portion of their salaries.

He explained that this amount was not enough and so the KRG used internal sources of revenue to fund as much of the salaries it could, still coming short by close to $60 million, Barzani said, adding, “It is clear that in the past government spending has been both unjust and mismanaged,” since 80 percent of revenue goes to public sector salaries, while public sector beneficiaries make up just 20 percent of the population.

“That is why we together – as citizens, government and political parties – need to make a consequential decision that even in better financial circumstances most of the revenues cannot be spent on public sector salaries. We must use a significant part of the budget for increasing public services and building a stronger economy.”

Editing by John J. Catherine