BEIRUT — 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 centers, 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, electricity is rationed, and prices for basics are spiraling out of reach, according to people exiled from the city.

“Not just the militants. Any civil servant, from the courts to the schools, they cut their salary by 50 percent,” 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 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.

Al-Tamimi came across a directive announcing the fighters’ salary cuts in Raqqa: “On account of the exceptional circumstances the Islamic State is facing, it has been decided to reduce the salaries that are paid to all mujahedeen by half, and it is not allowed for anyone to be exempted from this decision, whatever his position.”

Those circumstances include the dramatic drop in global prices for oil – once a key source of income – airstrikes that have targeted cash stores and oil infrastructure, supply line cuts, and crucially, the Iraqi government’s decision to stop paying civil servants in territory controlled by the extremists.

A Russian-backed Syrian government offensive in Aleppo province, where ISIS controls major towns, is also putting pressure on the militants. Government troops and allied militiamen have advanced toward the town, leading many militants to send their families to Raqqa.

An exile from al-Bab said low-level fighters there have begun to grumble, and townspeople have overheard Islamic State officials discussing crippling airstrikes on oil infrastructure in Syria and Iraq and the cutoff of supply lines and revenue sources.


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