KP CM warns federal delays in NFC transfers are pushing province into fiscal crisis

Khyber-Pakhtunkhwa Chief Minister Sohail Afridi expressed deep concern to Prime Minister Shehbaz Sharif over the persistent failure to release constitutionally guaranteed federal funds by the federal government, warning that the province was facing an acute fiscal and governance crisis.

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

He highlighted that the provincial budget for the current fiscal year was formulated on the basis of constitutional rights, including Hydel’s net profit, 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 fiscal obligations,” the prime minister said.

It noted that actual federal releases “consistently fell short” of budgeted levels. CM Afridi stressed that the withholding of routine monthly transfers from the NFC was unconstitutional and detrimental to cooperative federalism.

According to the letter, KP’s NFC entitlement of Rp658.4 billion has been fulfilled with only Rp604 billion to date, creating a shortfall of Rp54.4 billion. The Prime Minister described this as a “substantial breach” affecting cash management, budget execution and service delivery in critical sectors.

“The impact is most marked 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 continuing gap has undermined the provision of essential public services and development interventions in these historically marginalized areas, eroding the objectives of the merger and weakening national cohesion,” the letter reads.

He also emphasized that the fiscal restrictions occurred while the province was on the front lines against terrorism and continued to shoulder extraordinary expenses related to flood response and rehabilitation, and support for temporarily displaced people, responsibilities that he noted were national in scope but that the province financially borne in a “disproportionate and unsustainable” manner.

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