The finance ministry of the Kurdistan Regional Government (KRG) has accused the central government in Baghdad of not informing it of Baghdad’s financial policy, as well as not determining the price of a barrel of oil. The ministry indicated that the region's share of the federal budget outlay did not exceed 10% of its total entitlements, which amount to 17%.
Budget disagreements are some of the most important outstanding issues between the two governments, after oil and the disputed regions. The Kurds are demanding that Baghdad use the general budget to pay for Peshmerga allowances and expenses, given that there are 110,000 Peshmerga fighters. Baghdad authorities, however, say that this number is exaggerated.
The finance ministry submitted a report to Iraqi Kurdistan’s parliament during a session that was held after months of delay to discuss the general budget for the current year. "The Iraqi government is only paying the Kurdistan region 10.7% of its budget. This share amounts to roughly 12.604 trillion dinars ($10.8 billion), whereas the size of the federal budget is 117.123 trillion dinars ($100.8 billion)," the statement said.
"The full amount that is allocated for Kurdistan by the central government has not been reaching the region during the past few years. Moreover, power plants have not been receiving any compensation for fuel expenses," the report added.
The federal government has a "mandatory expenditure" to provide the KRG with food provisions and medical allowances as part of its share of the budget. Under an agreement that was concluded between the two governments in 2004, 17% of the federal budget would be allocated to Kurdistan. This rate was based on the size of the population, which is set to be re-examined after a census is taken.
The report accused the government in Baghdad of “increasing sovereign and federal expenses, as well as limiting the expenses of Kurdistan. In turn, this led to a decrease in the region's share of the budget." The report also indicated that "the sovereign expenditure rate exceeds 26% [of the budget], which is more than 30 trillion dinars [$25.8 billion], whereas the mandatory federal expenditure rate is estimated to be over 7%, or more than eight trillion [$6.9 billion]."
According to the report, "Only 20 to 50% of the expenses that were allocated for the elections, the census, agricultural and social care subsidies, land-mine clearance and pilgrimages have reached Kurdistan." The KRG was not informed, "as stipulated by the constitution, of the financial policy of the federal government. Moreover, [the central Baghdad government] did not determine the price of a barrel of oil, which was estimated at $85 for the current year."
The KRG announced in early April that it stopped the exportation of oil "until further notice" because of Baghdad's “lack of respect for its financial obligations toward Kurdistan." The government in Kurdistan also confirmed that "it has been 10 months since it last received any payments, and there have been no indications from the federal authorities that they would pay the money at a later stage."
On the other hand, Baghdad said that the KRG did not adhere to the concluded agreements, and doing so would allow the region to receive its 17% of the federal budget.