ERBIL, Kurdistan Region – The KRG is committed to going forward with radical payroll reforms that necessitate more cuts and eliminating double-salary holders and ghost employees. The measures are to cope with new financial realities mainly caused by the loss of Kirkuk’s oil revenues, the government revealed on Wednesday following a meeting with the parliament.
Prime Minister Nechirvan Barzani, his deputy Qubad Talabani, and their cabinet held a special meeting with the heads of parliament committees to discuss the budget reforms that focus on the salaries that take 70 percent of the KRG’s annual budget.
Business cannot proceed as usual in 2018 and the years to come, the government stated, promising to also inform parliament about results of an audit of the oil and gas sector.
The KRG is committed to reaching an agreement with the Iraqi government to secure its 17 percent of Iraq’s 2018 budget, but is also mindful that this may not be possible.
Acting Finance Minister Rabar Sidiq presented two options to the parliament: the estimated KRG 2018 budget if Erbil and Baghdad reach an agreement and expectations for the possibility that no agreement is reached.
Amanj Rahim, secretary of the Council of Ministers, told reporters they informed MPs about all possibilities regarding revenues and expenses, including oil income.
“Both options have been studied and the figures were presented to the MPs with accuracy,” Rahim said.
“Priority number one is for the Kurdistan Regional Government to reach an agreement with the Government of Iraq,” he added.
The KRG expects to provide at least 400 billion Iraqi dinars ($337.4 million) net budget monthly if no agreement is made with Baghdad to cover the salaries and the basic services.
“With the current income that is collected by the Kurdistan Regional Government, the salaries of the [public] employees cannot be paid,” Rahim said, explaining that this is due to the loss of Kirkuk’s oil fields.
The KRG will, however, be able to pay salaries if reforms go as planned.
“We must commit to the reform that we have decided to take. If we do that reform, we can carry on with 400 billion dinars to some extent... it is the program of the Kurdistan Regional Government that the people must receive at least their salary every month.”
The KRG in 2016 introduced unpopular pay cuts as part of austerity measures responding to an ongoing financial crisis caused by a drop in oil prices and budget cuts from Iraq. The measures caused months of protests in the Kurdistan Region, especially in the provinces of Sulaimani and Halabja.
Rahim said reforms must make sure that “real” employees receive their salary on time and those who are not must be removed.
The first stage of the biometric system that digitally recorded state employees has revealed that there are some who receive more than one salary.
“The problem is they receive this legally. We have to amend some of the laws so that people will no longer receive more than one salary,” Rahim said at a joint press conference with Sherkawt Jawdat, head of the parliament’s Natural Resources committee.
Pensioners are also a big strain on the budget and that must be addressed, he said, noting that some people retired as ministers without ever holding such a position in the KRG. He was referring to veteran Peshmerga and politicians who fought against the former Iraqi government. While he praised their service, Rahim said they must receive a fair amount.
A committee will be formed to audit and investigate the pensioner system to remove the unqualified and make changes to how much they receive.
“Our efforts are directed at paying the salaries as soon as possible. Real employees should not be made victims of ghost ones who receive their salaries illegally,” said MP Sherko Jawdat.
The KRG will also continue to focus on providing basic services such as education and security. It has decided to reduce or cancel some of the high fees introduced in recent years such as those on property purchases and company registrations, Rahim explained.
Rahim insisted that the KRG must receive 17 percent of the Iraqi budget.
Iraq has decided to allocate less than 12.6 percent for the KRG, claiming the number reflects the Region’s population. Erbil argues that no one knows the actual population because no census has been done since the 1980s.
Rahim explained that international meditation is ongoing to bring Erbil and Baghdad to the negotiating table on this issue and other outstanding problems between them. France and Britain in particular are working on this issue, he said.
French President Emmanuel Macron received PM Barzani in Paris on December 2 and said that the Iraqi budget must be shared equally and the constitutional rights of the Kurdish population must be protected.
British Prime Minister Theresa May on Tuesday invited PM Barzani to visit London while stating that her government will fight for Kurdish rights in Iraq.
Both Macron and May said they support the territorial integrity of Iraq.
KRG officials have described Iraq’s draft budget bill as “unconstitutional.” The government hopes Baghdad will commit to talks before the new year, at least on the budget.
“A third party,” is needed to help with such talks, Rahim said, adding that in addition to France and Britain, the UN Mission in Iraq (UNAMI) and the International Monetary Fund (IMF) are involved to varying levels.
Kurdistan Region parliament delegation to visit Baghdad
The Kurdistan Region parliament has decided to send a delegation to Baghdad to meet with their Iraqi counterparts, both Rahim and Jawdat revealed.
Jawdat, from the Natural Resources Committee that deals with the KRG’s oil and gas, described the financial situation in the Kurdistan Region as “catastrophic, sensitive and dangerous,” but also hoped that the Region will take steps to pass this critical stage as soon as possible and “break the ice” between the Iraq and Kurdistan governments.
He said their visit to Baghdad is part of ending the post-referendum political stalemate.
Oil and gas transparency
The KRG in October last year signed an agreement with Deloitte, the largest professional and financial services company in the world, to conduct an audit of the Kurdistan Region’s oil production, exportation, and revenue. It was then followed by a similar agreement with the UK-based Ernst and Young.
Rahim, of the Council of Ministers, said the audits will be completed soon.
“In the near future, we have decided to invite Deloitte itself to the parliament of Kurdistan to present their report with their own figures,” Rahim said.
The audit was requested because the public and MPs have doubted figures released by the KRG’s Ministry of Natural Resources, he explained.
The audits cover the process of oil production, exports and revenues since 2014. The results will be made public.
Regarding Wednesday’s meeting between the KRG and the parliament, Rahim said they informed MPs “about all the oil blocks, all incomes collected by the Region, and the issue of the loans in detail.”