The reduction comes after a controversial independence reference by the Kurds last year sparked a furious dispute with the central government.

The budget is based on projected oil exports of 3.9 million barrels per day, including 250,000 bpd produced in the Kurdistan autonomous region of northern Iraq, at a price of $46 per barrel.

It also projects $77.5 billion (63 billion euros) in revenues and a deficit of $10.6 billion, and allocates $20.8 billion for investments.

Kurdish lawmakers boycotted the vote because it reduced Kurdistan's part of the national budget from 17 percent to 12.6 percent.

Article 9 of the Iraqi constitution stipulates that Kurdistan's share of the budget must reflect the size of the population of the autonomous region.

But the text of the budget approved by parliament on Saturday states that the autonomous Kurdish government must export 250,000 bpd and hand over the money it earns from the sales to the federal authorities.

"If Kurdistan does not hand over (the money), the finance ministry will take it from its part of the budget," it said.

Iraqi Kurdish peshmerga forces took control of the northern province of Kirkuk, home to key oilfields, in June 204 after federal forces withdrew in the face of an offensive by the Islamic State group.

Late last year, following the failed Kurdish referendum on independence rejected by Baghdad, federal forces recaptured the oilfields, severing a key lifeline for the Kurds whose economy largely depended on oil revenues.

Iraqi parliament speaker Salim Jubburi on Saturday said the 2018 budget had also "resolved" the issue of "salaries for Kurdish civil servants and the peshmerga".

The federal government will resume paying those salaries which had been frozen for the past six month amid demands by Baghdad for an audit to determine the number of civil servants in Kurdistan, he said.