Erbil and Baghdad remain locked in a deep financial dispute over domestic revenue calculations and monthly deductions, a deadlock that has intensified the Kurdistan Region’s fiscal crisis and prompted renewed negotiations between both sides.

Sharp Decline in Non-Oil Revenues

According to details obtained by Channel8, the fallout from the war and Iraq’s volatile financial situation has sharply impacted the Kurdistan Region. Last month, the Region’s non-oil revenues dropped to just 86 billion IQD.

Despite this shortfall, the Federal Government continues to base the Region’s monthly non-oil revenue on an assumed 120 billion IQD. This mismatch, combined with a 70 billion IQD monthly deduction imposed by Baghdad, has created a severe fiscal deficit for Erbil.

KRG Delegation’s Mission in Baghdad

A high-level Kurdistan Regional Government (KRG) delegation is scheduled to travel to Baghdad to address the financial dispute. The delegation’s main objective is to hold talks with Falih al-Sari, the Iraqi Minister of Finance and Head of the Ministerial Council for Economy.

The aim is to secure a new Iraqi Cabinet decision that aligns federal calculations with the Kurdistan Region’s actual, real-time revenues.

Risks to Salaries and Government Operations

The ongoing financial deadlock poses a serious threat to government operating costs and the salaries of contract employees. The KRG requires 43 billion IQD monthly to cover the payroll of contract teachers and staff.

However, because Baghdad continues to calculate deductions based on the assumed 120 billion IQD figure, securing these funds has become nearly impossible for the regional government.

Erbil’s Proposed Revenue Settlement Framework

The KRG plans to present a new framework to Iraqi officials. The proposal calls for calculating domestic revenue contributions based on actual “trial balance reports” and real available income, rather than fixed estimates.

Under this mechanism, 50% of recorded revenues would remain with the Region, while the remaining 50% would be transferred to Baghdad. So far, the Iraqi government has not agreed to this proposal.

Cabinet Decision Still Required to Break the Stalemate

Resolving the domestic revenue dispute requires a new decree from the Iraqi Cabinet. The current mechanism, which enforces the 120 billion IQD baseline, is tied to the 2025 financial plan.

Any structural change to this system must be approved by Iraq’s highest executive authority to ease the financial pressure on the Kurdistan Region.