At a Glance

• Baghdad is ready to adjust the Kurdistan Region's budget and waive 12 trillion IQD in debt.

• Oil management, non-oil revenues, and the ASYCUDA system remain strict federal red lines.

• Iraqi Finance Minister Faleh al-Sari confirmed plans to amend Article 10 of the budget bill.

• The federal government is open to increasing the Kurdistan Region's budget share past 13%.

Channel8 has learned that Baghdad is prepared to adjust the Kurdistan Region's budget allocation and compromise on several financial demands, though it maintains that oil management, non-oil revenues, and the ASYCUDA system remain strict red lines.

Key Statements and Focus Area

• According to exclusive information obtained by Channel8 directly from Iraqi Finance Minister Faleh al-Sari, the federal government is willing to amend Article 10 of the budget bill to eliminate multiple restrictive clauses, though other provisions will remain non-negotiable.

• Baghdad is reportedly open to raising the Kurdistan Region’s budget share from 12.70% to over 13%, with the possibility of reaching 14.14% depending on the outcome of upcoming negotiations.

The federal government is prepared to waive 12 trillion Iraqi dinars (IQD) in accumulated debt previously claimed under Article 10, which consists of 3 trillion IQD owed to the Trade Bank of Iraq (TBI) and 9 trillion IQD from trial balance accounts spanning 2014 to 2024.

In another major concession, Baghdad has indicated its readiness to drop natural gas delivery demands from the Kurdistan Region for the 2027 fiscal budget, deferring the requirement until 2028.

In return, Baghdad is demanding 445,000 barrels of crude oil per day, presenting data from an international firm showing the Kurdistan Region has a 2027 production capacity of 650,000 barrels daily—metrics that OPEC has reportedly verified and shared with the federal government.

Implementation hurdles and deep mistrust over Article 10 have prompted Erbil to temporarily delay sending its negotiating delegation back to the capital.

Despite the skepticism, Kurdish officials still intend to return eventually to negotiate terms on the strict redlines surrounding oil, non-oil revenue, and the ASYCUDA system.

FYI

Channel8 earlier reported that the Kurdistan Region has drafted a new fiscal strategy aimed at finalizing its financial share within the Iraqi general budget by tying the allocation directly to the national food ration card system. 

According to data from the ration system, utilizing this metric would guarantee the region a stable 13% share of federal revenues. While this strategic blueprint has been compiled by Erbil's negotiating delegation, the proposal has not yet been officially transmitted to the federal authorities in Baghdad.

Meanwhile, Kurdish lawmakers have issued strong warnings against retaining the controversial "actual expenditure" clause within the upcoming federal budget framework. 

Legislators argue that calculating the Kurdistan Region's fiscal share under this model—where funds are only deduced after sovereign and governing expenses are subtracted—would severely impact the region's economy. 

If the actual expenditure framework remains intact, the region's national allocation is projected to plummet to just 6.1%. 

This sharp reduction would slash Erbil's federal funding to roughly 12.8 trillion dinars, falling far short of the 29 trillion dinars initially requested by the Kurdistan Regional Government.

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