Iraq’s federal finance ministry on Tuesday announced that it will be signing a “loan agreement” with the Kurdistan Regional Government (KRG) to pay the salaries of its employees, adding that Erbil’s dues will be settled after it complies with its obligations within the budget.

Meetings between delegations from the KRG and the federal government have been ongoing over the past months, aimed at resolving lingering disputes over the Region’s share in the federal budget.

On Sunday, Baghdad decided to send 500 billion Iraqi dinars (close to $382 billion) for the salaries of the public servants of the Region, but the Region’s finance ministry is yet to announce receiving the payment.

“The [federal] finance ministry is keen to ensure the financial rights of all the people and employees in accordance with the stipulated controls and instructions. Accordingly, the federal government’s decision was made to provide financial loans to the KRG as salaries for its employees,” said the Iraqi ministry on Tuesday.

The agreement will be signed between the KRG finance ministry and Iraq’s Rafidain and Rasheed banks, according to the statement which added that the federal ministry was complying with its budget obligations of ensuring the financial rights of those entitled to them.

The KRG Council of Ministers is set to convene on Wednesday to decide on the mechanism of paying the salaries of July, two days after Erbil said that that the 500 billion IQD provided by Baghdad was not enough to meet the needs of the Region.

“The Iraqi government has not abided by its agreements with the Kurdistan Region… not only it has not sent the share of the Kurdistan Region, it also did not send the salaries of the public servants… We feel like this is a policy of starvation,” Pehsawa Hawramani, the spokesperson of the KRG, said during a televised address in Erbil.

The KRG has failed to pay its civil servants on time and in full for several years due to the financial crisis. Public sector employees have not been paid for the months of July and August following several failed deals with Baghdad.

Iraq passed its highly-contentious budget bill for the years 2023, 2024, and 2025 in June, which includes a record $152 billion in spending, of which the Kurdistan Region’s share is 12.6.