KRG to transfer non-oil revenue to federal Finance Ministry

ERBIL —  The Kurdistan Regional Government (KRG) took a significant step on Wednesday by announcing its decision to transfer non-oil revenue collections to the federal Ministry of Finance, aiming to bolster financial cooperation with Baghdad. Prime Minister Masrour Barzani revealed this decision during a Cabinet meeting.

The Cabinet session, chaired by Barzani, addressed various critical issues, including Turkish President Recep Tayyip Erdogan’s recent visit to Baghdad and Erbil, which Barzani emphasized as pivotal for bolstering bilateral relations.

Finance and Economy Minister Awat Sheikh Janab presented a detailed report on initiatives regarding April salary distribution and verification processes conducted. The report outlined mechanisms for implementing the KRG’s commitments to share non-oil revenues with Baghdad, in accordance with constitutional and federal financial management laws.

The Cabinet said this initiative should remove any pretext for the federal Ministry of Finance to delay payment of the region’s financial entitlements, particularly salaries. Additionally, the government appointed the Ministry of Finance and Economy and the negotiating delegation to oversee the transfer of legally determined shares of non-oil revenues to the federal treasury.

The Cabinet also discussed the salary domiciliation program for Kurdistan’s employees, underscoring its importance for enhancing the region’s banking infrastructure and financial transparency. It said it had initiated the domiciliation program in Kurdistan a long time ago through the KRG’s own domiciliation initiative known as My Account.

A KRG statement said, “Our talks with the federal government are centered on the mechanism of domiciliation, not domiciliation itself.”

It remains uncertain whether Baghdad would find this satisfactory. The federal government has stipulated that for salary payments to continue, the KRG must comply with a federally-administered salary domiciliation program, as ruled by the Iraqi Federal Supreme Court in February.

The KRG cabinet also reiterated its commitment to swiftly resume oil exports, agreeing with the federal government to channel revenues through the Iraqi Ministry of Oil’s marketing company, SOMO, to the federal treasury.

Despite expectations, a breakthrough in exporting KRG’s oil did not occur during Erdogan’s visit to Iraq on April 22. In 2022, the Iraqi Federal Supreme Court declared the KRG’s oil and gas law, which permitted independent oil transactions, as “unconstitutional.” The iraqi budget law requires the handover of at least 400,000 barrels of KRG oil to SOMO for export. Despite anticipation, no progress was made in exporting KRG oil during Erdogan’s visit to Iraq on April 22.

Additionally, the KRG cabinet approved several proposals during the meeting to facilitate the repayment of specialized bank loans and adjust commercial bank loan settlements and interest rates. The session concluded with unanimous approval of new regulations for classifying contractors in the region, aiming to ensure competency, fairness, and transparency in awarding government contracts and excluding contractors who fail to meet contractual obligations.