ISLAMABAD:
As the National Finance Commission’s allocation policy intensifies, the federal government on Saturday said it has disbursed Rs7.8 trillion to Khyber-Pakhtunkhwa over the last 15 years, including Rs1.4 trillion over and above the NFC’s share.
There is no outstanding debt of the Khyber-Pakhtunkhwa government to the Center and the last tranche of Rs 46.5 billion under the NFC was disbursed on December 17, the Finance Ministry said.
“The federal government releases the provincial NFC shares every fortnight, and there is no outstanding liability in this regard,” the ministry said a day after Chief Minister Sohail Afridi demanded immediate release of all outstanding dues.
The tax dispute between the Center and the provincial government is mainly over expenditure on the newly merged districts, which are outside the purview of the NFC until the over 5 million residents of these districts are treated as part of the NFC during the ongoing discussions in the 11th Commission.
The KP claimed that the Center owed a debt of between over Rs 850 billion and over Rs 1.3 trillion due to a 4% increase in population after the 2018 merger.
But the Finance Ministry said it was regularly paying all dues to the provincial government, which amounted to Rs7.8 trillion since 2010, when the 7th NFC became operational.
The ministry said an amount of Rs46.5 billion was released to the Khyber-Pakhtunkhwa government on December 17, underlining the federal government’s compliance with its timely disbursement commitments.
“The Ministry of Finance reaffirms the continued commitment of the Federal Government to ensure timely, transparent and sustainable financial transfers to Khyber-Pakhtunkhwa Province (KP), in line with the NFC award and beyond, reflecting the federation’s determination to support provincial development, fiscal stability and post-conflict rehabilitation,” the statement added.
Under the 7th NFC awards, Khyber-Pakhtunkhwa’s share was determined to be 14.62% of the provincial share in the divisible pool. In recognition of the extraordinary burden borne by the province during the war on terror, an additional 1% of the indivisible pool was allocated exclusively to KP.
Although the 7th NFC Awards were initially planned for a period of five years, the lack of consensus on subsequent NFC awards necessitated the continued implementation of the 7th NFC Awards framework, according to the Ministry of Finance. As a result, the KP continues to receive its share, including the additional allocation for the war against terrorism, the statement added.
From July 2010 to November 2025, an amount of Rs 5.9 trillion was transferred to KP as part of the divisible pool. He said that during the same period, Rs705 billion was provided to KP due to the war against terrorism, reflecting federal recognition of the sacrifices and responsibilities of the province.
More than 117 billion additional rupees have been allocated to KP over the years to support internally displaced people, who have been affected by the war on terror, according to the ministry.
For the 11th NFC, the Center has also constituted committees that would try to reach consensus on multiple issues, including allocation of KP share to over 5 million merged residents and review of direct transfers, etc.
The Finance Ministry said that from July 2010 to November 2025, an amount of Rs 482.8 billion was transferred towards oil and natural gas royalty, gas development surcharge, natural gas excise duty and other related titles.
Additional federal support beyond NFC, the ministry said more than Rs 1.4 trillion, or 18 percent of the total transfers, is also being given to KP in addition to its share in NFC.
Following the merger of erstwhile FATA into KP after the 7th NFC award, and in the absence of a revised NFC formula, the federal government financed the expenditure of the newly merged districts from its own NFC share, the Finance Ministry said. Since 2019, an amount of Rs704 billion has been transferred to the provincial government in this regard.
At the request of the Government of Khyber-Pakhtunkhwa, the first meeting of the sub-group on the newly merged districts is scheduled for December 23, 2025, with the Minister of Finance, Khyber-Pakhtunkhwa, as the designated convener, demonstrating a collaborative and transparent approach to resolving outstanding budgetary issues.
The ministry said that despite constitutional decentralization, the federal government continues to invest in the welfare and development of the provinces and has given Rs115 billion to KP in the last 15 years of the federal PSDP for development projects of a provincial nature.
However, the money given to KP was much less than what the federal government gave to Sindh and Punjab from PSDP, mainly due to its political constraints.
Through the Benazir Income Support Program (BISP), an amount of Rs 481.4 billion was spent in Khyber-Pakhtunkhwa from FY 2016 to FY 2025, providing essential social protection to vulnerable households, he added.
The official statement added that the Ministry of Finance remains fully committed to equitable distribution of resources, fiscal federalism and sustainable support to Khyber-Pakhtunkhwa, ensuring that provincial needs, especially those arising from security concerns, travel and administrative integration, are met in a timely and responsible manner.
