Complex Made Simple

Iraq’s Kurdistan region caught in deep economic impasse

Poverty and unemployment rates soar, while Baghdad implements budget cuts

Iraq’s semi-autonomous Kurdistan region has been enduring a deep-seated financial and economic crisis that has sent poverty and unemployment rates to new highs and severely damaged consumers’ purchasing power.

Unemployment among youth reached a massive 40 per cent, while public servants’ salaries dwindled, according to a report by the London-based Asharq Al-Awsat.

The crisis was touched off in early 2014 after the federal government in Baghdad cut budget payments to the Kurdistan region over disputes related to oil exports.

The war against ISIS and the decline of oil prices have further exacerbated the crisis in the semi-autonomous region.

The region’s local government and the federal government have been playing a blame game for the failure to seal the agreement the two sides reached in December last year.

A few days ago, the Iraqi oil minister told a parliament meeting that the decision to cut budget payments to Erbil (capital of the region) was a result of the region’s failure to deliver oil shipments to an Iraqi government-owned oil company.

Under the deal, Kurdistan was required to deliver 550,000 barrels of oil a day in return for 17 per cent of Iraq’s federal budget.

Major oil companies refrain from directly dealing with the region as the Iraqi government continues to warn them of legal action.

A Kurdish official has recently said there are 1.3 million public servants who are a major drain on government expenditure.