ISLAMABAD:
As the National Finance Commission’s allocation politics heat up, the federal government on Saturday said it has disbursed Rs 7.8 trillion to Khyber-Pakhtunkhwa in the last 15 years, including Rs 1.4 trillion above NFC’s share.
There are no outstanding obligations of the Khyber-Pakhtunkhwa government towards 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 provincial NFC shares on a fortnightly basis and there are no outstanding liabilities in this regard,” the ministry said a day after Chief Minister Sohail Afridi demanded immediate release of all outstanding dues.
The fiscal dispute between the Center and the provincial government is mainly related to the expenditure in the newly merged districts, which is outside the ambit of the NFC until the over 5 million inhabitants of these districts are treated as part of the NFC during the ongoing discussions under Commission 11.
The KP has been claiming that the Center owes it more than Rs 850 billion to more than Rs 1.3 trillion due to a 4% increase in population after the merger in 2018.
But the Finance Ministry said it has been regularly paying all outstanding dues to the provincial government, which amounted to Rp7.8 trillion since 2010, when the seventh NFC became operational.
The ministry said an amount of Rs 46.5 billion was released to the Khyber-Pakhtunkhwa government on December 17, underlining the federal government’s compliance with timely disbursement commitments.
“The Ministry of Finance reaffirms the federal government’s continued commitment to ensuring timely, transparent and sustained financial transfers to Khyber-Pakhtunkhwa (KP) province under the NFC Award and beyond, reflecting the federation’s determination to support provincial development, fiscal stability and post-conflict rehabilitation,” it added.
As per the 7th NFC allotment, Khyber-Pakhtunkhwa’s share was determined to be 14.62% of the provincial share in the divisible fund. In recognition of the extraordinary burden the province borne during the war on terrorism, an additional 1% of the undivided fund was allocated exclusively to KP.
Although the 7th NFC Award was originally planned for a five-year period, the lack of consensus on subsequent NFC awards necessitated the continued implementation of the 7th NFC Award framework, according to the Ministry of Finance. Accordingly, KP continues to receive its fair share, including the additional allocation for the war on terrorism, he added.
From July 2010 to November 2025, an amount of Rp5.9 trillion was transferred to KP as its share of the divisible fund. He said that during the same period, Rp705 billion has been provided to KP due to the war on terrorism, reflecting federal recognition of the province’s sacrifices and responsibilities.
According to the ministry, over the years more than 117 billion additional rupees have been provided to KP to support internally displaced people, who were affected by the war on terrorism.
For the 11th NFC, the Center has also constituted committees that would try to reach a consensus on multiple issues including allocation of share of KP for over 5 million amalgamated residents and investigation of direct transfers etc.
The Finance Ministry said that from July 2010 to November 2025, an amount of Rs 482.8 billion was transferred on account of royalties on oil and natural gas, gas development surcharge, excise duty on natural gas and other related items.
Additional federal support beyond NFC, the ministry said KP is also given more than Rp 1.4 trillion, equivalent to 18% of total transfers, in addition to its share in NFC.
Following the merger of erstwhile FATA with KP following the seventh NFC award, and in the absence of a revised NFC formula, the federal government has been funding the expenses of the newly merged districts with its own share of NFC, the Finance Ministry said. Since 2019, an amount of Rs 704 billion has been transferred to the provincial government for this purpose.
At the request of the Government of Khyber-Pakhtunkhwa, the first meeting of the sub-group on newly merged districts is scheduled for December 23, 2025, with the Minister of Finance, Khyber-Pakhtunkhwa, as the designated coordinator, demonstrating a collaborative and transparent approach to resolving outstanding fiscal issues.
The ministry said that despite the constitutional devolution, the federal government continues to invest in provincial welfare and development and provided Rp115 billion to KP over the last 15 years of the federal PSDP for development projects of a provincial nature.
However, the money that went to KP was much less than what the federal government gave to Sindh and Punjab from the PSDP, mainly due to its political coercion.
Through Benazir Income Support Program (BISP), an amount of Rs 481.4 billion was spent in Khyber-Pakhtunkhwa from FY 2016 to FY 2025 to provide critical social protection to vulnerable households, he added.
The official statement added that the Ministry of Finance remained fully committed to equitable distribution of resources, fiscal federalism and sustained support to Khyber-Pakhtunkhwa, ensuring that provincial needs, particularly those arising from security challenges, displacement and administrative integration, are addressed in a timely and responsible manner.
