ISIS faces budget crunch, killing perks and slashing salaries

Faced with a cash shortage in its so-called caliphate, the Islamic State group has slashed salaries across the region, asked Raqqa residents to pay utility bills in black market American dollars, and is now releasing detainees for a price of $500 a person.

The extremists who once bragged about minting their own currency are having a hard time meeting expenses, thanks to coalition airstrikes and other measures that have eroded millions from their finances since last fall. Having built up loyalty among militants with good salaries and honeymoon and baby bonuses, the group has stopped providing even the smaller perks: free energy drinks and Snickers bars.

Necessities are dwindling in its urban centres, leading to shortages and widespread inflation, according to exiles and those still suffering under its rule. Interviews gathered over several weeks included three exiles with networks of family and acquaintances still in the group's stronghold in Raqqa, residents in Mosul, and analysts who say ISIS is turning to alternative funding streams, including in Libya.

In Raqqa, the group's stronghold in Syria, salaries have been halved since December 2015, electricity is rationed, and prices for basics are spiralling out of reach, according people exiled from the city. "Not just the militants. Any civil servant, from the courts to the schools, they cut their salary by 50%," said a Raqqa activist now living in the Turkish city of Gaziantep, who remains in close contact with his native city.

But that apparently wasn't enough to close the gap for a group that needs money to replace weapons lost in airstrikes and battles, and pays its fighters first and foremost. Those two expenses account for two-thirds of its budget, according to an estimate by Aymenn Jawad al-Tamimi, a researcher with the Middle East Forum who sources Islamic State documents.

Within the last two weeks, the extremist group started accepting only dollars for "tax" payments, water and electric bills, according to the Raqqa activist, who asked to be identified by his nom de guerre Abu Ahmad for his safety. "Everything is paid in dollars," he said. His account was bolstered by another ex-Raqqa resident, who, like Ahmad, also relies on communications with a network of family and acquaintances still in the city.