SULAIMANIYA - The Kurdistan Regional Government (KRG) is descending toward a crisis of insolvency and civil unrest as Iraq's federal government appears increasingly reluctant to make financial transfers under a restrictive new budget law.
Baghdad has sent just one payment of 598 billion Iraqi dinars ($460 million) since the beginning of August, leaving the KRG far short of the revenue needed to pay a public sector wage bill of more than 900 billion dinars per month. Several groups of public employees throughout Sulaimaniya province have already announced strikes and protests against unpaid salaries.
The financial squeeze is also choking Kurdistan's oil industry. Companies operating KRG oil fields say they cannot invest the capital required to produce at full capacity unless they are paid according to their contracts, raising the likelihood of a vicious cycle of descending oil output, revenue shortfalls, and political conflict.