A Temporary Agreement between the Federal and Regional Governments

In a telephone communication on Sunday, 8 August between the Federal and Regional Prime Ministers, both sides agreed on the contents of a seven clause temporary agreement laid out by the negotiation teams representing both governments. The deal paved the way for the Federal Government to transfer a monthly amount of 320 billion IQD to the Kurdistan Regional Government as a partial deal to settle differences between Erbil and Baghdad over the budget and border crossing management. This arrangement shall remain in force until the budget Law of 2021 is ratified by the Federal Parliament.

The First Clause of the temporary agreement refers to the unification of the procedures of managing the air, land and sea border crossings. According to Article 114; First, the management of customs at the border crossings of the Kurdistan Region is shared between the Federal and Regional Governments.

The Second Clause stipulates that an amount of (320) billion Iraqi dinars per month will be transferred to Erbil for the following months (August, September and October) to pay some of the Region’s expenses. This will continue until the 2021 budget Law is passed by the Federal Parliament.

The Third Clause of the agreement outlines arrangements for restructuring and repaying money loaned to the Kurdistan Regional Government by the Trade Bank of Iraq during the war against ISIS.

Agreement on auditing the KRG accounts for years 2014-2020 and formulatingan action plan to deal with the external and internal KRG debts are included in clauses 4 and 5 respectively, while cooperation in the gas and electricity sectors are included in Clause 6.

 

1 - Customs: Unifying the procedures of air, land and sea border crossings:

A -  It is possible to contract with an external company and agree on customs accounting after the agreement between the two parties is in effect, and a technical work team consisting of Federal and Regional Government employees shall be appointed to monitor the implementation of the agreement.

B - Unifying customs procedures and ports in the Region with all outlets in the Federal Government in any way of work that is approved (prices) and with a unified customs tariff.

C - Accounting systems are set up to fulfil the customs imports obtained through the Region's ports and dispose of them in accordance with the Federal Financial Management Law No. 6 of 2019.

D - Establish instructions and controls that the two parties of the Federal Government and the Region abide by to control the entry of import materials into the country in accordance with the Federal Customs Law and other laws.

2 - The Region’s additional share in the federal budget:

A - The Region is funded at an amount of (320) billion Iraqi dinars per month for each of the months (August, September and October) to pay some of the Region’s expenses, provided that the amount financed does not exceed the amount financed by the central government in 2019 and that the data on which the determination of this amount based is summarized in the following:

First: The lack of a federal budget for the year 2020 so far.

Second: The central government does not have accurate figures for the monthly salaries paid by the Regional Government.

Third: The above-mentioned amount is based on a mathematical equation based on the federal government’s estimates of the salaries of employees and retirement salaries that the Kurdistan Regional Government pays monthly, and the estimates are subtracted from the oil imports from the Region’s oil production and the region’s other imports.

Fourth: The Federal Government and the Region must adhere to the oil production policy within the OPEC Plus agreement, according to proportions.

B - It is agreed in the following years to set an amount of a fair percentage of the budget for the Region, to be placed in each budget law taking into account the constitutional criteria, population ratios, and the Region’s oil and non-oil imports in the preceding year and how to calculate them.

3 - Within a period not exceeding thirty-five days, an agreement shall be made on a mechanism for repaying and scheduling the payment of debts owed by the Region in favor of the (TBI) bank.

4 - Auditing of accounts: A joint committee is established consisting of the Office of Financial and Federal Supervision and the Region to deal with the issue of accounts resulting from the two parties and agreement on methods of settling accounts between the Federal government and the Regional Government and from the accounts of 2014 to 2020 and the region provides all the information requested by the central government.

5 - Handling the region's previous debts: The Region has no objection to providing all the additional information required to develop an action plan to address it.

6 - The Kurdistan Regional Government expresses its readiness to agree on the two accounts of electricity and gas in accordance with the legal and technical contexts that are agreed upon by the competent authorities in the two governments.

7 - The arrangement will remain in effect until the federal budget is approved.