Iraq triggers financial crisis by withholding crucial federal funds from Erbil.
The Kurdistan Regional Government (KRG) has mounted a fierce defense of its economic survival, revealing that Baghdad has starved the Kurdistan Region of its constitutional rights by transferring less than three percent of Iraq’s total federal budget over the last seven years.
The comprehensive report, meticulously audited and approved by both federal and regional supreme audit boards, uncovers a systematic campaign of financial strangulation by the central government. Between 2019 and 2025, Erbil was legally allocated 146.4 trillion Iraqi dinars ($111.7 billion) out of a total 155 trillion-dinar entitlement under successive Iraqi budget laws. Yet, the federal ministry actually transferred a mere 33.4 trillion-dinars. This staggering shortfall means only 2.8% of the national budget ever crossed into Kurdistan, completely ignoring the region’s constitutional share of 12.67%—a figure already lower than the 14.1% Kurdish share of the Iraqi population recorded in the 2024 census.
Keeping the Region afloat
Despite being cut off from the vast majority of its rightful national wealth, Erbil has shown remarkable economic resilience. Over the same seven-year period, the KRG successfully distributed 65 trillion dinars in public salaries, covering nearly half of that monumental cost out of its own hard-won local oil and non-oil revenues. Even during the height of the budget freeze, the regional administration kept public life functioning by funding 49% of all public wages through local collection.
“Out of eighty-four monthly salary payments due over the past seven years, the federal government’s deliberate withholding of funds caused us to miss just ten,” a senior KRG Media Department official stated. “Every single missed payment rests entirely at the doorstep of the federal authorities in Baghdad.”
Erbil has not only stabilized public livelihoods under immense pressure but has continued to invest in its people. Using local revenue buffers, the KRG permanently employed or contracted 66,474 citizens, including vital medical staff and top university graduates, while protecting the welfare of 19,918 individuals with special needs and 25,000 political prisoners.
New economic warfare from Baghdad
The crisis has escalated significantly following a sudden directive from Iraqi Finance Minister Faleh Sari. Going back on explicit promises not to delay Kurdish public salaries, Sari ordered a unilateral deduction of 120 billion dinars from Erbil’s monthly allocation, labeling it an adjustment for “local revenues.”
This deduction hits the region at a time when its local resources are severely strained. According to official documents from the Central Bank of Iraq, Kurdistan’s non-oil revenues recently plummeted by 78%. Kurdish officials point out that this steep decline was directly caused by Baghdad’s own administrative hurdles, specifically technical delays in rolling out the federal ASYCUDA customs system at Kurdish borders. This delay effectively blocked regional trading companies from accessing foreign currency at official rates, bringing cross-border trade with Turkey to a sudden halt.
Year Iraqi General Budget (Trillions) Legal KRG Share (Trillions) Actual Funds Sent (Trillions) Total Withheld by Baghdad (Trillions)
2019 133.1 16.8 5.3 4.4 (post-deduction)
2021 129.9 16.4 1.2 10.2 (post-deduction)
2023 198.9 25.2 4.6 11.7 (post-deduction)
2024 211.8 26.8 10.0 10.8 (post-deduction)
2025 211.8 26.8 9.5 11.3 (post-deduction)
Erbil defends its rights
In a coordinated diplomatic push to protect its citizens, Erbil has dispatched four high-level delegations to Baghdad to fight the financial cuts. Kurdistan Region Prime Minister Masrour Barzani has set up a direct line of communication with Iraqi Prime Minister Ali Zaidi to block the federal finance ministry’s punitive measures.
The first delegation is fighting to protect the June payroll for Kurdistan’s 1,190,391 public beneficiaries. The KRG currently spends 42 billion dinars of its monthly local income just to pay contract-based teachers and public workers. If Baghdad insists on withholding the 120 billion dinars without warning, it will create an artificial deficit, threatening the livelihoods of more than a million families.
The remaining three Kurdish delegations are pushing for long-delayed rights across other sectors. They are working to finalize the customs agreement, secure federal pensions for 25,000 Kurdish political prisoners who currently hold only registration codes and resolve disputes over medical supplies and healthcare funding with the federal Ministry of Health.
Kurdish leaders remain firm: Erbil will not accept unlawful financial pressure, and Baghdad must honor its constitutional obligations to the people of Kurdistan.