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

Bamo Nouri, Honorary Research Fellow, City St George's, University of London

Tue, Mar 11, 2025, 1:55 p.m. 5 min read

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 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 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. Iraq’s Supreme Court ruled later in the year 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.

The dispute escalated in 2023 when Iraq’s Supreme Court ruled that revenues 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.

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 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 for a few days each week, forcing families to ration their supply or buy expensive private alternatives.