The issue of Kurdistan Region employee salaries and non-oil revenues, along with the implementation of the ASYCUDA customs system, has become a complex problem between Erbil and Baghdad. While both sides have reached an agreement on several technical points, the final decision of the Iraqi Council of Ministers is awaited to settle the Region's share and untie the financial knot between them.

Integration of Financial Files and Efforts for Agreement

Salaries, non-oil revenues, and the ASYCUDA system have become three interconnected issues. 

The government of Ali Faleh al-Zaidi and the caretaker government of the Kurdistan Region have made good strides on the ASYCUDA issue and have reached an agreement on many of the disputed points, and the remaining disputed points have been raised to the Federal Council of Ministers for a final decision.

The Conflict over Non-Oil Revenues and Baghdad's Financial Sanctions

Regarding non-oil revenues, the Kurdistan Region has been unable to meet Baghdad's monthly requirement of 120 billion dinars for several months due to a drop in its collections. 

Erbil is requesting that the federal government accept half of its actual revenue based on the trial balance, though Baghdad continues to insist on the full amount. 

Last month, even though the Kurdistan Region sent 50 billion dinars in non-oil revenues, Baghdad deducted 70 billion dinars as a clearance offset.

Demands to Annul Past Decisions

The Kurdistan Regional Government stated that obligating it to send 120 billion dinars as non-oil revenue is "illegal." 

The KRG is calling for a new decision to be made to annul the previous ruling issued during the cabinet of Mohammed Shia al-Sudani, which required Kurdistan to pay 120 billion dinars monthly in non-oil revenues to Baghdad in exchange for salary transfers.

War and the New System: Internal Revenue is Decreasing

The outbreak of war in the region and the implementation of ASYCUDA at Iraqi border crossings since the beginning of this year have significantly reduced the Kurdistan Region's non-oil revenues.

Banking Blockade and Crippled Commercial Activity

On the implementation of the ASYCUDA and its impacts, the KRG stated that since January of this year, the Iraqi government has imposed a suffocating blockade under the pretext of implementing ASYCUDA. 

It added that Baghdad is preventing dollars from being made available to Kurdish traders, completely crippling commercial activity since that time.

Signing of a Joint Memorandum to Unify Customs

To resolve this issue, another round of negotiations began between the two governments. On June 18, a joint memorandum to implement the ASYCUDA was signed between the customs authorities of Iraq and the Kurdistan Region. 

It was then submitted to the Ministerial Council for Economy to be decided upon and put into effect.

Meeting of Finance Ministers in Baghdad

On June 19, the Ministerial Council for Economy, chaired by Finance Minister Faleh al-Sari, met with the KRG delegation led by Finance Minister Awat Sheikh Janab to discuss the points of the signed joint memorandum.

New Mechanism for Customs Exemptions and Border Control

During the session, officials established a joint committee to inspect border crossings throughout the Kurdistan Region. 

Furthermore, both ministries of finance agreed to draft a joint memorandum detailing customs exemptions and regulatory permits for submission to the Council of Ministers, which will be implemented across all Iraqi and regional border checkpoints upon approval.

Proposals for Revenue Collection Rest with the Federal Government

The mechanism for revenue collection at the Kurdistan's border crossings will be submitted to the Federal Council of Ministers for a final decision, following an agreement to present proposals from both sides.

An Ambiguous Status of Decisions and a Fateful Meeting

The proposals from the Ministerial Council for Economy were scheduled to be presented for approval at last week's Federal Council of Ministers meeting, but they were not introduced. Today, the regular meeting of the Council of Ministers is taking place.

The Salary Crisis and Expectations from the Federal Government

Expectations today are focused on the federal government resolving the issues of the Kurdistan Region’s non-oil revenues, salary transfers, and the recommendations of the Ministerial Council for Economy, especially since 45 days have passed since the distribution of May salaries.