Iraqi court ruling centralizes Kurdistan salary payments

BAGHDAD — In a ruling certain to have wide repercussions, the Iraqi Federal Supreme Court has mandated the centralization of salary payments for employees in the Kurdistan region through federal government banks.

Under the court’s decision, the disbursement of salaries for all ministry employees, provincial staff, non-ministerial government entities, retirees, and social security beneficiaries in Kurdistan must now be processed outside the region by federal governmental banks. This move deducts the funds directly from the Kurdistan region’s budget allocation, as stipulated by the nation’s budget law for the current and future fiscal years.

The ruling aims to ensure direct oversight and financial management by the Iraqi federal government, requiring both the Iraqi prime minister and his KRG counterpart to facilitate this transition.

This directive also extends to all related financial transactions within Kurdistan, mandating coordination with the federal Ministry of Finance rather than through the KRG’s financial institutions. Additionally, the court’s order emphasizes the need for accuracy in the financial data submitted for salary payments, holding the highest authorities within the involved entities accountable for the integrity of this information.

The verdict is viewed by many as another setback to the Kurdistan Region’s autonomy, further centralizing control over its fiscal operations under the federal government of Iraq. It follows a history of disputes between Baghdad and Erbil, the capital of Kurdistan, over budget allocations, oil revenues, and independence efforts.

Hiwa Afandi, head of the KRG Department of Information Technology, tweeted: “‘Federal’ court hating its prefix working tirelessly to demolish federalism.”

The use of scare quotes around the term ‘federal’ follows a similar refrain by KRG PM Masrour Barzani in response to previous verdicts he deemed were against the KRG.

Last year, the KRG’s independence energy policy – by which it bypassed the federal government in exports its own oil – was dealt a severe blow by an arbitration case between Iraq and Turkey (which facilitated the exports) that found in favour of Iraq. The federal budget passed last year – with Kurdish votes – demanded the KRG hand over most of its oil and non-oil revenues to the federal treasury in return for a share of the overall budget.

Since then, the KRG and Baghdad have been at loggerheads over unpaid salaries for Kurdistan Region public sector workers. The ruling today is, ostensibly, meant to end this impasse and allow for the unimpeded disbursement of salaries.

The decision is expected to streamline the salary payment process but also raises concerns about the Kurdistan Region’s ability to govern its financial affairs independently. Entities within the region are now required to submit monthly financial reviews to the Federal Ministry of Finance, aligning with practices of federal government ministries and further integrating Kurdistan’s financial operations with those of the central government.

Officials from the Kurdistan Regional Government have yet to respond to the ruling, which comes amid ongoing negotiations over oil revenues and budgetary issues between the regional and federal governments.