Adel Abdul Mahdi’s Iraqi caretaker government in Baghdad April 16 has ordered its Finance Ministry in an official document to cut federal budget contributions to the semi-autonomous Kurdistan Regional Government in Erbil, pushing the KRG toward bankruptcy and cutting off the payment of salaries to its civil servants.

Abdul Mahdi’s government said the step was taken due to the international oil decline that has hit Iraq hard as well as Erbil’s failure to submit 250,000 barrels of oil per day to Iraq’s State Organization for Marketing of Oil (SOMO) in return for public funding under Iraq’s 2019 budget law. Iraq continuously sent federal budget appropriations to Erbil throughout 2019, although the KRG has not delivered a single barrel of oil to SOMO. The document also calls for there to be a settlement on long-standing financial issues between Baghdad and Erbil that date to 2004. Erbil says Baghdad’s decision is illegal and a political measure against Kurds.

More than 90% of Iraq's budget depends on oil revenues; these monies are used to pay millions of public sector employees. But the country is facing unprecedented financial, political, and social crises due to the dramatic decline of Brent crude oil to around $27 a barrel, growing coronavirus mortalities, political conflicts on forming a new government, a resurgent Islamic State insurgency and rampant administrative corruption.

KRG Prime Minister Masrour Barzani, in a statement following his meeting with UN special representative to Iraq Jeanine Hennis-Plasschaert, said cutting the KRG’s share from the Iraqi budget was “political pressure against the people of the Kurdistan Region.” The president of the Kurdistan region, Nechirvan Barzani, described Baghdad's decision as “unconstitutional and unlawful,” saying the KRG budget and salaries must not be “politicized.”