In a recent disclosure by the Kurdistan Regional Government (KRG) Council of Ministers, the fiscal dynamics between the federal government and the Kurdistan Region for the year 2023 have been laid bare, underscoring significant disparities and outstanding liabilities.

The KRG revealed that for the fiscal year 2023, the federal government was slated to allocate a substantial sum of 16.497 trillion dinars ($12.5 billion) to the Kurdistan Region from the federal budget and loans. However, only a fraction of this allocation, amounting to 998 billion dinars ($756 million), was disbursed to the KRG. The disbursement, consisting of 400 billion dinars in January 2023 and 598 billion dinars in July 2023, represents a stark contrast to the anticipated funding.

Additionally, the federal government extended loans totaling 3.7 trillion dinars ($2.8 billion) to the KRG throughout the year, further highlighting the Region's reliance on external financial support.

Despite commitments outlined in Deloitte's report, which indicated remittance of oil revenues from the Region to the Federal Ministry of Finance after covering production and transportation costs, a portion of these funds remains untransferred.

Moreover, border gate revenues totaling 728 billion dinars ($551.5 million) were expected to be transferred to the Federal Treasury, yet discrepancies persist in this regard.

In total, including budgetary shares, loans, and revenues, the allocated funds for the KRG in 2023 amounted to 7.119 trillion dinars ($5.393 billion), falling significantly short of the projected figure.

Notably, a substantial portion of the federal government's share for 2023, totaling 9.378 trillion dinars ($7.104 billion), remains outstanding, exacerbating financial strains within the Kurdistan Region.

The repercussions of delayed transfers have been felt keenly, with significant disruptions in government expenditures, particularly regarding Peshmerga salaries. Additionally, the KRG Ministry of Natural Resources reportedly handed over 12 million barrels of oil without fulfilling obligations to cover production and transportation costs or pay entitlements to oil companies.

The audits conducted for the first half of 2023, in collaboration with federal and regional financial oversight bodies, are yet to yield final results. However, the suspension of oil exports from Kurdistan since March 25, 2023, has compounded financial losses, estimated at $10 billion, for both the federal treasury and oil companies operating in the region.

As the KRG grapples with fiscal imbalances and delayed transfers from the federal government, the Region faces mounting challenges in meeting financial obligations and sustaining essential services.