The KRG public employees, who have already been going through a constant crisis in terms of their salary payments for a decade now, will now have their salaries deducted by 3% from the month of July 2025 through 2027, even though the employees have not even yet received their June salaries yet. The KRG initially tried to frame the deductions as being from the Iraqi finance ministry, but an official document later revealed that the deduction has actually been at the request of the KRG finance ministry.

The Kurdistan Region’s pension crisis stems from years of financial mismanagement and a missing pension fund infrastructure. Despite collecting pension contributions from employees for over a decade, the region never established a proper pension fund, and previous deductions essentially disappeared into the government’s general budget.

The current crisis was triggered by a 2022 Federal Supreme Court ruling (Case No. 212/Federal/2022) that required the Kurdistan Regional Government to implement Iraq’s Unified Retirement Law No. 9 of 2014. This law mandates that employees contribute 10% of their basic salary to pensions (up from the previous 7%) while the government must contribute 15% – totaling 25% of each employee’s basic salary.

However, the KRG has chosen selective compliance: demanding employees pay their missing 3% contribution retroactively while ignoring the government’s much larger 15% obligation that has never been paid.

A Crisis Built on Crisis

The timing of these deductions reveals the depth of the region’s financial dysfunction. During 2015-2024, employees didn’t receive their full salaries for 16 months, and received reduced salaries with various deductions for 44 months. Yet the government is now demanding these same employees repay pension contributions for periods when they weren’t even receiving their wages.

The situation has become so dire that employees haven’t received their June 2025 salaries, yet the 3% deductions began in July. This means workers are being charged for money they never received while simultaneously having their current (delayed) wages reduced.

The regional government owes tens of millions of dinars to employees and retirees in unpaid salaries accumulated over the past decade. According to legal analysis of the situation, the government’s debt to employees is “hundreds of times” larger than the pension contributions they’re now demanding from workers.

The KRG was supposed to establish separate accounts for employee deductions and implement systems for workers to benefit from their contributions. Instead, these deductions disappeared, and no proper pension fund was created until recently.

How the Deduction System Works

Based on Financial Circular No. 4 of 2025 from the Ministry of Finance and Economy, the debt calculations cover the period from January 1, 2014, to December 31, 2024. The amounts vary significantly by employment grade, with higher-grade employees facing substantially larger debt burdens:

Complete Breakdown by Grade:

Grade 1 Employees:

• Total debt: 4,149,300 Iraqi Dinars
• Active employee repayment: 115,285 IQD monthly over 36 months
• Retiree repayment: 69,155 IQD monthly over 60 months

Grade 2 Employees:

• Total debt: 3,337,900 Iraqi Dinars
• Active employee repayment: 92,719 IQD monthly over 36 months
• Retiree repayment: 56,310 IQD monthly over 60 months

Grade 3 Employees:

• Total debt: 2,696,200 Iraqi Dinars
• Active employee repayment: 74,894 IQD monthly over 36 months
• Retiree repayment: 44,936 IQD monthly over 60 months

Grade 4 Employees:

• Total debt: 2,208,000 Iraqi Dinars
• Active employee repayment: 61,333 IQD monthly over 36 months
• Retiree repayment: 36,800 IQD monthly over 60 months

Grade 5 Employees:

• Total debt: 1,837,000 Iraqi Dinars
• Active employee repayment: 51,000 IQD monthly over 36 months
• Retiree repayment: 30,616 IQD monthly over 60 months

Grade 6 Employees:

• Total debt: 1,552,300 Iraqi Dinars
• Active employee repayment: 43,119 IQD monthly over 36 months
• Retiree repayment: 25,871 IQD monthly over 60 months

Grade 7 Employees:

• Total debt: 1,290,860 Iraqi Dinars
• Active employee repayment: 35,857 IQD monthly over 36 months
• Retiree repayment: 21,514 IQD monthly over 60 months

Grade 8 Employees:

• Total debt: 1,048,550 Iraqi Dinars
• Active employee repayment: 29,126 IQD monthly over 36 months
• Retiree repayment: 17,475 IQD monthly over 60 months

Grade 9 Employees:

• Total debt: 831,600 Iraqi Dinars
• Active employee repayment: 23,100 IQD monthly over 36 months
• Retiree repayment: 13,860 IQD monthly over 60 months

Grade 10 Employees:

• Total debt: 633,400 Iraqi Dinars
• Active employee repayment: 17,594 IQD monthly over 36 months
• Retiree repayment: 10,556 IQD monthly over 60 months

Legal experts have raised serious questions about the legitimacy of these deductions. The selective implementation stands out as particularly problematic – why is the government demanding employee contributions while completely ignoring its own 15% matching obligation that would dwarf the amounts being collected from workers? The fate of previous deductions also remains unclear, as the 7% contributions collected from employees over the years simply disappeared without proper accounting or pension fund establishment.

The retroactive application raises additional concerns. The Federal Court decision that supposedly justifies these deductions took effect in November 2022, yet the government is calculating debt back to 2014. Perhaps most troubling is the double punishment aspect – employees are being charged for contributions during periods when the government itself failed to pay their salaries.

The Broader Crisis

This pension deduction controversy reflects the Kurdistan Region’s broader governance and financial crisis. The government has systematically failed to pay full salaries for extended periods while illegally suspending employee promotions, which reduces retirement benefits. The mismanagement of pension funds has occurred with no accountability, and the current approach prioritizes revenue collection over meeting the government’s own obligations to workers.

The 3% deduction represents not just a financial burden on struggling employees, but a fundamental breach of the social contract between the government and its workforce. Workers who have already sacrificed through years of unpaid wages are now being asked to pay for their government’s decade of financial mismanagement.

The KRG’s implementation of 3% pension deductions reveals a troubling pattern: a government that demands compliance from employees while refusing to meet its own obligations. As employees continue to wait for their June salaries while facing new deductions on future paychecks, the pension crisis has become a symbol of the broader dysfunction plaguing the Kurdistan Region’s public administration.