Erbil-Baghdad Dispute Over Budget Phrase Threatens to Delay Kurdistan's Oil Deliveries

A long-standing dispute between Erbil and Baghdad has come to a head over a single phrase in Iraq's draft 2027 budget law. The term 'actual expenditure' has become a point of contention, with Kurdistan's delegation demanding it be struck from the draft.

The Region's officials claim that this wording allows Baghdad to manipulate their share of revenue by deducting sovereign expenditures and governance-related spending before calculating Kurdistan's allocation. A source at the Kurdistan Regional Government's Ministry of Finance and Economy explained this mechanism: if Iraq's 2027 budget totals 200 trillion Iraqi dinars but the federal government spends only 140 trillion, 40 trillion would go toward sovereign expenditures and 10 trillion toward governance-related spending.

This leaves a remaining 90 trillion dinars for operational spending, from which Kurdistan's 12.67% share is calculated and paid. The Region's delegation argues that this wording gives Baghdad too much control over their revenue, and have pressed for explicit language specifying which categories of revenue require the Region to transfer 50% to Baghdad and which they are entitled to retain in full.

Beyond the 'actual expenditure' clause, the Kurdistan Regional Government has also renewed longstanding demands tied to the daily functioning of its institutions, including promotions, job grades, appointments, funding for the medication sector, and wheat subsidies. Separately, the federal government has demanded that Kurdistan hand over 500,000 barrels of oil per day for the 2027 budget, an amount Kurdish officials say far exceeds what they can realistically produce.

A meeting between Erbil's finance delegation and Iraqi Finance Minister Falih Sari's advisor took place on Thursday, where Kurdistan presented its positions on both the wording dispute and the oil figures. The outcome of talks between Sari and Prime Minister Ali al-Zaidi is likely to shape how the Region's share is defined in the coming budget cycle.

A source at Iraq's Ministry of Finance acknowledged that the matter remains open to negotiation, saying a political agreement along with parliamentary pressure will be needed before the wording can be changed. The federal government has not yet commented on the situation.