Baghdad offers Kurdistan payment tied to budget talks

Letter from Iraqi finance minister to KRG prime minister offers a one-time, $338 million payment – and continuing negotiations for a new budget deal.
Newly appointed Finance Minister Ali Allawi (left) formally takes over the portfolio from Fuad Hussein in a handover ceremony in Baghdad on May 7, 2020. Hussein was made Foreign Minister on June 6. (Source: Iraqi Prime Minister's media office)

Iraqi Finance Minister Ali Allawi has proposed a 400 billion Iraqi dinar ($338 million) payment to Iraq's financially struggling semiautonomous Kurdistan region to cover public-sector salary payments for April, in exchange for finalizing a longer-term oil and budget deal within a 30-day window.

The letter from Allawi to KRG Prime Minister Masrour Barzani, dated May 19, is the first indicator of how the newly elected government of Iraqi Prime Minister Mustafa al-Kadhimi will approach the financial relationship between Baghdad and Erbil – an issue that affects the KRG's ability to pay the public-sector employees and the international oil companies that constitute the foundation of Kurdistan's economy.

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