A newly revealed letter from the Iraqi Finance Ministry to the KRG, verified as authentic by both parties, lays the foundation for the “new agreement” on the timely disbursement of all 2025 KRG public employee salaries. However, much like previous agreements, this deal is built on ambiguous terms and unresolved policy disputes that could hinder its implementation and deepen political tensions between Erbil and Baghdad.

Both Erbil and Baghdad have announced a breakthrough agreement ensuring the regular payment of all 2025 salaries, but a closer look at its terms reveals several unresolved issues that could lead to renewed disputes. The agreement consists of three key points:

The first point maintains standard payroll disbursement procedures but does little to institutionalize a predictable mechanism for salary transfers. Without a clearly defined fiscal framework, salary payments remain vulnerable to political deadlock—as seen repeatedly in past years.
2. Unclear Guidelines on Employee Domiciliation – A Policy Minefield
The second point stipulates the submission of employee domiciliation (Tawtin) data, as required by the Federal Court. While seemingly an administrative measure, this provision introduces significant policy and political challenges. KRG finance ministry officials, speaking to Rudaw TV, have interpreted this requirement as validation of their existing MyAccount banking system through which public sector salaries are currently disbursed. However, Baghdad’s reference to “Tawtin”, as mandated by the Federal Court, suggests that it expects domiciliation through Iraq’s state-owned banking system.

This disconnect in interpretation creates substantial uncertainty around implementation requirements and compliance metrics. Given that 2025 is an election year, this ambiguity is highly likely to be politicized by both sides, potentially stalling implementation beyond the first few months.

3. The Non-Oil Revenue Clause: A Structural Policy Flaw
The third point in the agreement mandates the transfer of non-oil revenues, a provision that on the surface appears straightforward but is, in reality, a long-standing policy dispute with far-reaching fiscal implications.
For instance, in 2024, both Erbil and Baghdad agreed on the total revenue figures—the KRG generated approximately 4.3 trillion dinars in non-oil revenue and transferred 400 billion dinars to Baghdad. However, the core disagreement lay in the interpretation of the 50% revenue-sharing requirement set by the federal budget law:

• The Iraqi Finance Ministry maintains a literal approach, arguing that 50% of gross non-oil revenue must be transferred without deductions.

• The KRG, on the other hand, insists that the calculation should be based on net revenue—meaning that operational expenses, salary supplements, and investment costs should be deducted before determining the 50% share.

• Under this interpretation, the KRG only sent about 9% of its actual non-oil revenue, far below Baghdad’s expectations.

This recurring dispute sets a clear precedent for 2025. The absence of a standardized, mutually agreed-upon revenue-sharing formula creates a structural weakness that leaves this provision open to conflicting interpretations year after year. Without a clear mechanism for calculating non-oil revenue contributions, Baghdad could again withhold funds, delay salary payments, or leverage financial pressure against the KRG, as seen in previous disputes.

Moreover, this ongoing ambiguity reinforces the perception that KRG finances remain politically vulnerable, rather than operating under a stable, rules-based fiscal framework. Unless this issue is resolved, the 2025 salary agreement is likely to face the same implementation hurdles that have plagued past deals, leading to yet another cycle of uncertainty and political maneuvering.