Federal Government Rejects KP Allegations About Blocking NFC Funds

The federal government on Saturday rejected allegations that it withheld funds from Khyber-Pakhtunkhwa, saying the province had received its entire share under the National Finance Commission award through regular fortnightly transfers and that there were no outstanding liabilities.

The clarification followed accusations by Khyber-Pakhtunkhwa Chief Minister Sohail Afridi that federal funds, especially for the merged tribal districts, were blocked, with alleged arrears amounting to Rs 2.2 trillion.

Speaking while chairing the 43rd provincial cabinet meeting in Peshawar, Afridi accused the federal government of delaying the release of NFC funds for the financial year 2025-26, saying the non-release had disrupted development projects in the merged districts. He said the province’s NFC share for the current financial year was yet to be revealed, although Khyber-Pakhtunkhwa had complied with its constitutional obligations.

Ministry of Finance presents allocations

In response, the Finance Ministry said that under the 7th award of the National Finance Commission, Khyber-Pakhtunkhwa’s share in the divisible pool was fixed at 14.62 per cent, with an additional percentage point allocated to compensate for the province’s role in the war against terrorism. He said the award continues to be implemented while provinces have yet to reach consensus on further NFC arrangements.

As proof of the regular transfer mechanism, the ministry said that Rs 46.44 billion was released to Khyber-Pakhtunkhwa on December 17, 2025, as per the routine fortnightly disbursement schedule under the NFC.

According to official figures, Khyber-Pakhtunkhwa received Rs 5.867 billion under its NFC share between July 2010 and November 2025. Another Rs 705 billion was provided during the same period to cover costs related to the war against terrorism.

Read: Can the war on terror be won without political consensus?

Following the merger of the erstwhile Federally Administered Tribal Areas with Khyber-Pakhtunkhwa, the federal government transferred Rs 704 billion from its share between 2019 and 2025 to meet administrative and development expenditure in the newly merged districts.

Beyond the NFC allocations, the province received Rs482.78 billion in constitutionally mandated direct transfers, including oil and gas royalties, gas development surcharge, natural gas excise duties and other federal revenue sources.

The ministry said the additional federal support included 117.166 billion rupees provided to internally displaced persons, 115 billion rupees released for provincial development projects under the Public Sector Development Program and 481.433 billion rupees disbursed in conditional and unconditional cash transfers under the Benazir Income Support Program between fiscal years 2016 and 2025.

The ministry clarified that PSDP allocations are linked to project approval and progress and do not fall under the NFC divisible pool, adding that delays in PSDP releases cannot be treated as provincial arrears.

The federal government stressed that the figures demonstrate that federal financial obligations to the KP have been met in full and consistently, debunking claims that funds are being blocked or withheld.

Learn more: Tirah’s FATA Jirga rejects KP merger

The ministry said the creation of the 11th NFC on August 22, 2025 reflects the federal government’s commitment to resolve outstanding issues through consultations, adding that a sub-group has been formed to examine the financial implications of the merger of erstwhile FATA.

The federal government reiterated its commitment to fiscal federalism and equitable distribution of resources, saying provincial needs related to security, rehabilitation, integration and development would continue to be met through established constitutional mechanisms.