KP CM warns federal delays in NFC transfers push province into financial crisis

Khyber-Pakhtunkhwa Chief Minister Sohail Afridi has expressed deep concern to Prime Minister Shehbaz Sharif over the federal government’s continued failure to release constitutionally guaranteed federal funds, warning that the province was facing a serious fiscal and governance crisis.

In a letter to the Prime Minister, CM Afridi said, “I am compelled to record the deep and growing concern of the Khyber-Pakhtunkhwa government over the continued failure to release constitutionally guaranteed federal transfers, a failure which has now translated into an acute fiscal and governance crisis for the province.

He pointed out that the provincial budget for the current financial year was formulated based on constitutional rights, including net profit of Hydel, oil and gas royalties, post-merger shares in the National Finance Commission (NFC) and routine monthly transfers under the National Finance Commission (NFC).

“These were not discretionary assumptions but binding budgetary obligations,” the chief minister said.

He noted that actual federal releases were “consistently lower” than budgeted levels. CM Afridi stressed that withholding routine monthly NFC transfers was unconstitutional and detrimental to cooperative federalism.

According to the letter, KP’s NFC duty of Rs658.4 billion has been met with only Rs604 billion so far, creating a deficit of Rs54.4 billion. The chief minister described this as a “substantial violation” affecting treasury management, budget execution and service delivery in critical sectors.

“The impact is most striking in the merged districts, where development, stabilization and state consolidation are recognized national priorities. Despite a provincial allocation of Rs 292 billion, federal releases so far amount to only Rs 56 billion. This serious and persistent gap has undermined the delivery of essential public services and development interventions in these historically marginalized areas, eroding the objectives of the merger and weakening national cohesion,” the letter said.

He also noted that the budget constraints came as the province was on the front lines against terrorism and continued to shoulder extraordinary expenses related to flood response and rehabilitation, as well as supporting temporarily displaced people – responsibilities that he said were national in scope but borne financially “disproportionately and unsustainably” by the province.

“In view of the above, the KP Government expects immediate remedial action from the Federal Government, including full and unconditional release of all unpaid federal dues, especially routine monthly NFC transfers, Hydel net profit, oil and gas royalties and allocations for the merged districts, strictly in accordance with the constitutional provisions and agreed fiscal arrangements. Any further delay will only aggravate the fiscal stress of the province and weaken the capacity of governance at a critical time,” the letter concludes.