Centre, K-P NFC award politics heats up

Federal govt says no outstanding liabilities exist towards K-P

ISLAMABAD:

As the National Finance Commission award politics heats up, the federal government on Saturday said that it has disbursed Rs7.8 trillion to Khyber-Pakhtunkhwa in the past 15 years, including Rs1.4 trillion over and above the NFC share.

There are no outstanding liabilities of the Khyber-Pakhtunkhwa government towards the Center and the latest tranche of Rs46.5 billion under the NFC was disbursed on December 17, said the Ministry of Finance.

"The federal government releases provincial NFC shares on a fortnightly basis, and no outstanding liabilities exist in this regard," said the ministry a day after Chief Minister Sohail Afridi demanded immediate release of all the outstanding dues.

The fiscal dispute between the Centre and the provincial government is mostly related to the spending on the newly merged districts, which is outside the purview of the NFC until the over 5 million population of these districts is treated as part of the NFC during the on-going discussions under the 11th Commission.

The K-P has been claiming that the Centre owes it from over Rs850 billion to over Rs1.3 trillion on account of a 4% increase in population after the merger in 2018.

But the finance ministry said that it has been regularly paying all the outstanding dues to the provincial government, which amounted to Rs7.8 trillion since 2010 when the 7th NFC became operational.

The ministry said that an amount of Rs46.5 billion was released to the government of Khyber-Pakhtunkhwa on December 17, underscoring the federal government's adherence to timely disbursement commitments.

"The Ministry of Finance reaffirms the federal government's continued commitment to ensuring timely, transparent, and sustained financial transfers to the Province of Khyber-Pakhtunkhwa (K-P) in accordance with the NFC Award and beyond, reflecting the federation's resolve to support provincial development, fiscal stability, and post-conflict rehabilitation," it added.

Under the 7th NFC award, Khyber-Pakhtunkhwa's share was determined at 14.62% of the provincial share in the divisible pool. In recognition of the extraordinary burden borne by the province during the war on terror, an additional 1% of the undivided divisible pool was allocated exclusively to KP.

Although the 7th NFC award was originally envisaged for a five-year period, the absence of consensus on subsequent NFC awards necessitated the continued implementation of the 7th NFC Award framework, according to the Finance Ministry. Accordingly, K-P continues to receive its due share, including the additional allocation for the war on terror, it added.

From July 2010 to November 2025, an amount of Rs5.9 trillion has been transferred to K-P as its share of the divisible pool. It said that during the same period, Rs705 billion has been provided to K-P on account of the war on terror, reflecting federal recognition of the province's sacrifices and responsibilities.

An additional over Rs117 billion has been provided to K-P over the years to support Internally Displaced Persons, which were affected by the war against terrorism, according to the ministry.

For the 11th NFC, the Centre has also constituted committees that would try to reach a consensus on multiple issues including allocating K-P's share for over 5 million merged population and looking into straight transfers etc.

The finance ministry said that from July 2010 to November 2025, an amount of Rs482.8 billion has been transferred on account of royalties on oil and natural gas, gas development surcharge, excise duty on natural gas, and other related heads.

Additional Federal Support beyond NFC the ministry said that over Rs1.4 trillion, which is equal to 18% of the total transfers, is also given to K-P in addition to its share in NFC.

Following the merger of former FATA into K-P after the 7th NFC Award, and in the absence of a revised NFC formula, the federal government has been financing the expenditures of the newly merged districts from its own NFC share, said the finance ministry. Since 2019, an amount of Rs704 billion has been transferred to the provincial government under this head.

At the request of the government of Khyber-Pakhtunkhwa, the first meeting of sub-group on newly merged districts is scheduled for 23 December 2025, with the finance minister, Khyber-Pakhtunkhwa, serving as the designated convener, demonstrating a collaborative and transparent approach toward resolving outstanding fiscal matters.

The ministry said that despite constitutional devolution, the federal government continues to invest in provincial welfare and development and it gave Rs115 billion to K-P over the past 15 years from the federal PSDP for development projects of a provincial nature.

However, the money that went to K-P was far less than what the federal government gave to Sindh and Punjab from the PSDP, mostly because of its political compulsions.

Through the Benazir Income Support Programme (BISP), an amount of Rs481.4 billion has been spent in Khyber-Pakhtunkhwa from FY2016 to FY2025 providing critical social protection to vulnerable households, it added.

The official statement added that the Ministry of Finance remained fully committed to equitable resource distribution, fiscal federalism, and sustained support for Khyber-Pakhtunkhwa, ensuring that provincial needs, particularly those arising from security challenges, displacement, and administrative integration, are addressed in a timely and responsible manner.