Barzani says financial crisis may push Kurdistan to think ´beyond oil´

ERBIL, Kurdistan Region – Top business and government leaders in Kurdistan discussed strategies to work a way out of Erbil´s financial crunch, at a workshop Saturday led by Prime Minister Nechirvan Barzani.

Aides to Barzani told Rudaw that the aim of the meeting was to discuss ways to exit out of a serious financial crisis that has gripped the Kurdish economy since late 2014, when Baghdad froze the Kurdistan Regional Government´s (KRG´s) budget.

Then followed a colossal drop in global oil prices.  

Over 80 percent of the Kurdish economy has in the past decade relied on oil revenues from Baghdad, according to KRG sources.

Barzani said he hoped the crisis would push both the government and the public to seek new ways “beyond oil” to rebuild and develop Kurdistan.

“Hopefully, it will be a chance for all of us to start to reassess our conditions, as we find a way out of this crisis,” Barzani said.     

He explained the problem, and why his government has been unable overdue public salaries since September 2014:

"When we started producing our own crude oil, the price was over $110 (per barrel), but we sell it at a price of $20.”

The KRG had high hopes in 2014 of increasing oil production, enabling it to finance its own budget, independent of Baghdad.

That is when the Iraqi government decided to withhold Erbil’s share of national revenues, an estimated $1 billion.

The control of Kirkuk oil fields by the KRG-led Peshmerga forces in 2014 only added to the hopes, as Kurdish oil production gradually rose to over 700,000 barrels per day (bpd) in 2015.

There were realistic plans it could top 1 million bpd in the early months of 2016.

But months of plunging global oil prices have had a devastating impact on the KRG´s budget, with over 1.4 million employees dependent on government wages.

“We need about 850 billion dinars (around $700 million) to cope with the monthly salaries, but currently we have only half of that in oil revenues,” Barzani said at the meeting, where his deputy and several ministers were present.

The KRG´s other domestic revenues have also dropped from around 300 billion dinars (about $240 million) to about 140 billion dinars (about $110 million) in 2015, as many businesses have lost revenues.