Letter of the KRG Prime Minister to the Federal Prime Minister
Letter from the Prime Minister of the Kurdistan Regional Government to the Prime Minister of the Federal Government regarding the financial dues of the Kurdistan Region.
Your Excellency Mr. Prime Minister
Dear Mr. Mustafa Al-Kadhimi,
I trust this letter finds you well and in good health.
As Your Excellency is aware, since its formation the 9th ministerial cabinet of the Kurdistan Regional Government has undertaken rigorous efforts to identify areas of cooperation with the federal government, to strengthen our relationship, and to propose solutions to unresolved issues. On many occasions, this cabinet has made clear its desire for a mutually beneficial partnership with the federal government, one that serves the people on the basis of our shared principles of collaboration, consensus, and equity, as enshrined in the constitution.
My cabinet has from the start made clear its willingness to work with the federal government. Our first high profile delegation visited Baghdad on 16 July 2019, six days after my election and the formation of my government.
That visit resulted in the formation of a Joint Higher Committee with representation from both sides. The committee was headed by Dr. Thamer Al-Ghadban, the federal government’s Deputy Prime Minister and Minister of Oil. It was to his committee that the regional government presented a working paper that outlined its proposals for the resolution of outstanding disputes with the federal government. These steps were discussed at the first meeting of the Joint Higher Committee, in Erbil on 25 July 2019. It was recorded in the minutes of that meeting that the region was prepared to fulfill its oil and financial obligations in exchange for guarantees that it would receive the entirety of its rights and financial dues.
We have approached this working relationship in a positive and serious manner, and several proposals have been presented throughout our deliberations with federal government representatives. It was in this same spirit of cooperation, and within the same framework, that a delegation from the regional government, headed by the deputy prime minister, conducted several further meetings in Baghdad.
As a result of these intensive meetings, a mutual agreement was reached with the federal government regarding the federal budget law for the year 2020. In this agreement, the federal government committed to providing the regional government with its due financial share of the federal budget, from total actual expenditures (current and projected expenditures) after deducting sovereign expenditures.
Those calculations amounted to 12,577,087,022,000 (twelve trillion five hundred seventy-seven billion 87 million and 22 thousand) dinars (an average of 857 million dollars per month) owed to the regional government, in addition to the cost of transporting oil from the region’s fields, which accounted for an additional 29 million dollars per month. The agreement stipulated that the region’s oil and financial obligations be included in the draft budget.
However, the political situation at the time and the resignation of Dr. Adil Adbulmahdi, along with many of his government, prevented the submission of this agreed joint draft of the 2020 federal budget.
Following the formation of the new government under Your Excellency’s leadership, the regional government agreed to the official letter of His Excellency the federal Minister of Finance Dr. Ali Abdulameer Alawi, numbered (802), on 19 May 2020, which was in accordance with the official letter of the Ministry of Finance and Economy of the region numbered (201) and dated 19 May 2020. This was followed by extensive meetings between representatives of the federal government and the region, relying on the federal Financial Administrative Law to guide the discussion and provide a starting point for any agreement.
Based on the aforementioned, special provisions were agreed to settle unresolved financial disputes, as confirmed by the General Secretariat of the Federal Council of Ministers in its official letter numbered (13229) on 15 August 2020. The letter specifically outlined measures to address these issues (attached is a copy of the clauses agreed upon) with assurances that the federal government’s negotiating team would intensify their efforts and hold any necessary discussions with the representatives of the region to set the foundational framework for a long-term agreement, and implement it within draft federal budget law. Furthermore, the region agreed to all the provisions, as evidenced by the official letter of the Presidency of the Council of Ministers of the Regional Government, numbered (379), on 18 October 2020.
The agreement stipulated “it is upon the federal Ministry of Finance to fund the region with 320 billion dinars monthly to partially pay for the expenses of the region, and this amount has been specified on the basis of a mathematical equation built upon the federal government’s estimates for the region’s revenues from oil production and other revenues, and this means that the federal government deducted all of the region’s oil revenues and non-oil revenues from its actual entitlements within the federal budget.”
Despite this agreement, the regional government has yet to receive funds for the months of May, June, July, and October for the year 2020, without legal justification and addition to the failure to pay the dues and the salaries of the Peshmerga Forces, whose financial entitlements are listed within the framework of Ministry of Defense’s scheduled sovereign expenditures included in the annual budget law.
The way the Fiscal Deficit Act of 2020 was passed and ratified by the Council of Representatives, without the consent of Kurdistani representatives in the federal parliament, is considered a violation of the principles of equity, cooperation, and consensus which the constitution is meant to safeguard. Despite all of this, the region is nonetheless dutiful and remains fully prepared to fulfill its oil and financial obligations to the federal government, provided the federal government is committed to disbursing the full financial entitlements of the Kurdistan Region.
The regional government reaffirms its position and its vision for an agreement with the federal government based on the principles of the constitution, and ahead of the 2021 federal budget bill. That position has been reiterated many times: in our meetings, in the decisions of the region’s Council of Ministers, in official correspondence numbered (1839) on 5 October 2020 (379) and 18 October 2020, and in the letter of May 2020 from the Prime Minister of the Kurdistan Regional Government to His Excellency the federal Prime Minister.
I look forward to an opportunity to discuss a better way forward with you.
Prime Minister of Kurdistan Regional Government