Kurdish Lawmaker Outlines Three Paths for Iraq's 2026 Budget

ERBIL (Kurdistan24) - Uncertainty regarding the passage of Iraq's 2026 federal budget continues as the country navigates a protracted government formation process. A senior Kurdish lawmaker in Iraq's parliament has outlined three potential fiscal paths for the remainder of the year, emphasizing that despite the legislative delays, essential state functions and public sector salaries will not be interrupted.

Jamal Kochar, a Kurdish member of the Finance Committee in the Iraqi Parliament from the Kurdistan Islamic Union Party, detailed the current fiscal outlook during an interview with Kurdistan24. 

According to Kochar, the recent installation of new leadership at the Ministry of Finance has signaled an intent to pass a budget framework, though the exact form of that legislation remains contingent on the evolving political situation.

The Finance Committee member stated that the federal government is actively exploring mechanisms to ensure administrative continuity while minimizing the economic disruption caused by the stalled transition.

The current fiscal environment reveals that Iraq's budget process is heavily susceptible to political instability.

Delays in forming a complete cabinet often prevent the timely drafting and parliamentary approval of national spending legislation.

When budgets are delayed, the government must rely on temporary operational spending mechanisms, such as the 1/12th rule, to sustain state institutions. 

This continuity is particularly vital for both the federal government and the Kurdistan Region, as it ensures that civil servant salaries, ministerial operations, and essential public services remain funded during periods of political fragmentation.

Three Paths for Iraq's 2026 Budget

In his remarks to Kurdistan24, Kochar identified three distinct legislative scenarios that could govern Iraq's finances for the remainder of 2026. 

The first possibility involves the drafting and approval of a short-term budget designed specifically to cover expenditures for the final five to six months of the year.

The second scenario envisions the passage of emergency spending legislation, similar to the deficit financing law utilized during previous periods of fiscal constraint in 2020. This option would grant the government the legal authority to borrow funds to cover essential domestic spending without passing a comprehensive annual budget.

The third possibility is that no new budget law is passed at all. Under this scenario, the Iraqi government would continue to operate exclusively under the 1/12th rule, authorizing monthly spending based on the allocations of the previous year's budget.

Kochar explained to Kurdistan24 that he anticipates the parliament will likely pursue a mechanism closer to the first two options.

The lawmaker stated that rather than attempting to pass an extensive and complex annual budget at this late stage, the legislature will likely approve a targeted law to regulate those government expenditures that currently lack a defined legal framework.

Salary Assurances Amid Fiscal Uncertainty

A primary concern during budget delays is the potential disruption to public sector compensation.

However, the Finance Committee member firmly reassured the public that civil servant salaries will not be affected.

Kochar told Kurdistan24 that the failure to approve a new budget law will have no impact on the distribution of salaries for employees in either the Kurdistan Region or federal Iraq.

According to Kochar, the institutional safeguard against payroll disruption is the 1/12th spending system.

This mechanism allows the Ministry of Finance to disburse funds equivalent to one-twelfth of the previous year's budget each month.

The lawmaker explained that this legal provision ensures that operational expenditures, which include payrolls, remain fully funded even in the absence of new legislation.

Kochar pointed out that the 1/12th rule is not limited solely to salaries.

According to the report, the law also covers the daily operational expenses of federal ministries and essential public services, ensuring continuous funding for critical sectors such as electricity, gas, and fuel provision.

Political Delays and Institutional Challenges

The delay in passing the 2026 budget is directly tied to the prolonged government formation process in Baghdad. The political transition remains incomplete following recent parliamentary sessions.

According to Kurdistan24 reporting last Thursday, the Iraqi Parliament granted confidence to 14 ministers in the new cabinet led by Prime Minister Ali Zaidi.

However, several ministerial portfolios remain vacant due to ongoing political disagreements.

The report noted that candidates for several positions failed to receive parliamentary confidence, including the nominee for the Ministry of Construction and Housing, a post allocated to the Kurdish component, specifically the Kurdistan Democratic Party (KDP).

Despite the incomplete cabinet, key economic posts have been filled.

The parliament successfully granted confidence to Falih Sari, who has assumed the role of Minister of Finance, replacing Taif Sami.

According to Kochar, Minister Sari has already indicated his intention to pursue a budget law for the current year.

Historical Context of Budget Delays

Operating without a formal budget is not unprecedented in modern Iraqi governance.

According to the report, political conflict and delayed government formations have frequently prevented the timely approval of national budgets.

Kochar reminded Kurdistan24 that the Iraqi state successfully managed its financial obligations without an approved budget law in both 2014 and 2020.

During those years, the government utilized the same 1/12th system to maintain salary distributions and operational continuity.

While the reliance on temporary spending measures prevents immediate economic paralysis, it presents long-term institutional challenges.

Operating under the 1/12th rule restricts the government's ability to initiate new investment projects, expand infrastructure, or implement strategic economic reforms, effectively freezing the state in an operational holding pattern until political consensus is achieved.

Iraq's continued reliance on temporary fiscal mechanisms underscores the administrative challenges inherent in prolonged political transitions. 

As the new cabinet attempts to finalize its structure, maintaining institutional continuity through established spending rules remains essential while awaiting full legislative budget approval.