Baghdad to pay Kurds 'within days' as economic crisis hits war-torn Iraq

Iraq's central government will deliver a budget payment to the semi-autonomous Kurdish Regional Government (KRG) "within days" according to the Iraqi finance minister.

The money has been delayed due to poor fiscal management, according to Hoshyar Zebari, but has prompted speculation that an oil export deal between Baghdad and Erbil could be on the verge of collapse.

Baghdad would "transfer another payment to the KRG very soon", Zebari told Reuters news agency.

Angered by Kurdish attempts to export oil independently, Baghdad halted budget payments to the autonomous region in January 2014 and only resumed them in December the same year.

The two sides reached a deal in December that would see the central government transfer more than $1bn (£670,000) to Erbil each month in return for an oil delivery.

Zebari said both sides were still committed to the deal and admitted the central government was in the midst of a fiscal crisis, due to falling oil prices and the costly campaign against Islamic State (Isis) militants in the north of the country.

Baghdad has said it only paid a fraction of the agreed amount to the Kurdish authorities because the KRG did not supply the requisite amount of oil. But Zebari, who is a Kurd but serves in the central government, said the December deal was essential to maintaining good relations between the two.

He said: "It's a comprehensive deal that means a great deal for everybody. Both sides are committed to it and that is encouraging."

Both governments have coordinated over ongoing military operations against IS militants in northern Iraq, but they have yet to fully normalise relations in the wake of a major fallout over the KRG's attempts to sell oil independently of Baghdad.

The Kurds completed construction of a pipeline from its own territory to a Turkish port in 2014 and Turkey began to export the oil via ship without Baghdad's consent.

The tankers loaded with Kurdish crude attempted to dock at ports across the world but the deals were halted after Baghdad launched legal challenges.