Iraqi Kurdistan faces a deepening economic crisis as unpaid wages pile up

Public sector workers in Iraqi Kurdistan, a semi-autonomous region of northern Iraq, have endured irregular and delayed salary payments for more than a decade. Many of these people are owed staggering amounts^[1] of money – US$50,000 (£38,700) on average, and as much as US$120,000 for higher-level employees.

The region’s 6.5 million inhabitants have been caught in the middle of an unresolved political and financial conflict between the Kurdish Regional Government (KRG) and Iraq’s federal government in Baghdad. The conflict centres on disputes primarily over territorial control and oil revenues.

There are longstanding political tensions over Kurdish autonomy and governance in northern Iraq, particularly in disputed areas like oil-rich Kirkuk. The KRG held a referendum for independence in 2017, which was backed decisively^[2] by people living in northern Iraq. The electoral commission said 92% of the 3.3 million people who cast their ballots supported secession.

Baghdad, which had opposed the vote, rejected the result. It swiftly imposed sanctions on the region and sent Iraqi troops to retake several contested territories^[3]. Iraq’s Supreme Court ruled later in the year^[4] that, in order to preserve the unity of Iraq, no Iraqi province was allowed to secede.

Another major issue is the KRG’s independent export of the region’s oil production. Baghdad is opposed to this too, insisting that all of Iraq’s oil revenues must be centrally managed. The KRG, however, argues that its right to manage natural resources is protected under Iraq’s constitution^[5].

The dispute escalated in 2023 when Iraq’s Supreme Court ruled that revenues^[6] from Iraqi oil and gas must be fairly distributed to all of Iraq’s people, regardless of where it is found. This ruling has led to budget cuts in Iraqi Kurdistan.

These unresolved disputes have left Iraqi Kurdistan in economic and political limbo, with frequent salary delays for public sector employees and growing public frustration.

Iraqi Kurdistan is now experiencing a wider economic downturn, as the region’s limited private sector is also being affected by the salary crisis^[8].

Public sector employees make up a significant portion of the workforce. When they do not get paid on time, they cut back on spending. Businesses, from small shops to large retailers, are experiencing a slowdown^[9] in economic activity, leading to closures and layoffs.

Adding to the hardship is the lack of reliable access to basic services such as water and electricity. Many Kurdish households only receive water^[10] for a few days each week, forcing families to ration their supply or buy expensive private alternatives.

The situation with electricity is even worse^[11]. Government-provided power is available only for set hours each day, leaving households and businesses reliant on costly private generators.

While ordinary people suffer from water shortages and power cuts, the region’s ruling elite enjoy uninterrupted access to luxury services. The inconsistency in the provision of these essential services is not due to a lack of resources, but a failure of governance.

The ruling elite – dominated by the Barzani and Talabani families – have amassed vast wealth since the fall of Saddam Hussein in 2003 through their monopolisation of key industries^[12]. Investigations suggest^[13] that substantial amounts of the region’s oil wealth have been diverted through opaque contracts and off-the-books transactions.

Instead of channelling Iraqi Kurdistan’s oil revenues into public services, healthcare or infrastructure, large sums reportedly disappear into private accounts, foreign investments and elite patronage networks. This mismanagement has resulted in billions of US dollars in unaccounted oil revenues.

This economic monopoly has also reinforced a jobs-for-votes system. Reliant on government wages, the KRG’s 1.2 million civil servants feel pressured to support the region’s dominant parties, the Kurdistan Democratic party and the Patriotic Union of Kurdistan.

To maintain this political stranglehold, the two parties have suppressed private sector growth, ensuring economic dependency on public jobs. The telecommunications sector, for example, is dominated by Barzani-linked Korek Telecom and Talabani-linked Asiacell, with bureaucratic barriers blocking private competition.

Meanwhile, weak banking infrastructure and a lack of investment incentives stifle private sector growth, pushing people toward government jobs controlled by the ruling parties. Salaries and promotions often depend on political loyalty, reinforcing economic dependency and making independent enterprise difficult.

The unpaid salary backlog has forced many of Iraqi Kurdistan’s residents into massive personal debt. Many civil servants have been forced to borrow money from family, friends or banks just to cover rent, food, medical bills and tuition for their children. The mounting financial pressure has also led to an increase in divorce rates^[15].

Even if the KRG returns to paying salaries on time, the backlog must still be paid. Both Baghdad and the KRG are legally responsible for ensuring public sector workers receive the money they are owed.

Ignoring these arrears is a clear violation of the constitutional and international obligations that Iraq has committed to, which include the UN’s sustainable development goals.

The right to a fair wage and timely compensation is enshrined in Article 23 of the Universal Declaration of Human Rights^[16] and Article 7 of the International Covenant on Economic, Social and Cultural Rights^[17], both of which Iraq is a signatory to. And Iraq’s own constitution guarantees citizens the right to social and economic welfare, which includes timely wages.

Iraqi Kurdistan’s salary crisis is also contributing to the global refugee crisis. The Crossing^[18], a documentary that aired on ITV in 2022 about the capsizing of a dinghy of asylum seekers in the English Channel, demonstrated that economic despair has prompted many Kurds to risk their lives on dangerous migration routes in search of stability and opportunity.

Without a structured repayment plan, the crisis will remain unresolved – even if salaries are paid moving forward.

References

1. ^{^} owed staggering amounts (drawmedia.net)
2. ^{^} was backed decisively (www.bbc.com)
3. ^{^} several contested territories (www.theguardian.com)
4. ^{^} ruled later in the year (www.reuters.com)
5. ^{^} protected under Iraq’s constitution (gov.krd)
6. ^{^} ruled that revenues (www.reuters.com)
7. ^{^} Awder Shwan / Shutterstock (www.shutterstock.com)
8. ^{^} being affected by the salary crisis (shafaq.com)
9. ^{^} experiencing a slowdown (shafaq.com)
10. ^{^} only receive water (www.al-monitor.com)
11. ^{^} is even worse (peregraf.com)
12. ^{^} monopolisation of key industries (www.u4.no)
13. ^{^} suggest (drawmedia.net)
14. ^{^} Gailan Haji / EPA (epaimages.com)
15. ^{^} increase in divorce rates (shafaq.com)
16. ^{^} Universal Declaration of Human Rights (www.un.org)
17. ^{^} International Covenant on Economic, Social and Cultural Rights (www.ohchr.org)
18. ^{^} The Crossing (www.itv.com)