Federal Government Rejects KP Claims of Stagnant NFC Funds

The federal government on Saturday rejected allegations that it had withheld funds from Khyber-Pakhtunkhwa, saying the province has been receiving its full share under the National Finance Commission Award through regular fortnightly transfers and that there are no outstanding liabilities.

The clarification came following allegations by Khyber-Pakhtunkhwa Chief Minister Sohail Afridi that federal funds, particularly for the merged tribal districts, had stagnated, with alleged arrears amounting to Rs 2.2 billion.

While chairing the 43rd provincial cabinet meeting in Peshawar, Afridi accused the federal government of delaying the release of NFC funds for the fiscal 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 fiscal year had not been published so far, even though Khyber-Pakhtunkhwa fulfilled its constitutional obligations.

The Ministry of Finance describes the allocations

In response, the Finance Ministry said that under the seventh National Finance Commission Award, Khyber-Pakhtunkhwa’s share in the divisible fund was fixed at 14.62%, with an additional percentage point allocated to offset the province’s role in the war on terrorism. He said the award continues to be implemented as the provinces have yet to reach a consensus on subsequent NFC agreements.

As evidence of the regular transfer mechanism, the ministry said Rs 46.44 billion was released to Khyber-Pakhtunkhwa on December 17, 2025, in accordance with the routine fortnightly disbursement schedule under the NFC.

According to official figures, Khyber-Pakhtunkhwa received Rs 5,867 billion as part of NFC between July 2010 and November 2025. During the same period an additional Rs 705 billion was provided to cover costs related to the war on terrorism.

Read: Can the war against terrorism be won without political consensus?

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

Beyond NFC allocations, the province received Rs 482.78 billion through constitutionally mandated direct transfers, including oil and gas royalties, gas development surcharges, natural gas excise taxes and other federal revenue sources.

The ministry said the additional federal support included Rs 117.166 billion provided to IDPs, Rs 115 billion released for provincial development projects under the Public Sector Development Program and Rs 481.433 billion 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 fall outside the divisible NFC fund, adding that delays in PSDP releases cannot be treated as provincial arrears.

The federal government highlighted that the figures demonstrate that federal financial obligations to KP have been fully and consistently met, debunking claims of stagnant or withheld funds.

Read more: FATA Jirga in Tirah rejects KP merger

The ministry said the establishment 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 the erstwhile FATA.

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