ISLAMABAD:
As the National Finance Commission’s pricing policy heats up, the federal government on Saturday said it has disbursed Rs7.8 trillion to Khyber-Pakhtunkhwa in the last 15 years, including Rs1.4 trillion beyond the NFC share.
There are no outstanding liabilities of the Khyber-Pakhtunkhwa government to the Center and the latest tranche of Rs 46.5 billion under the NFC was disbursed on December 17, the finance ministry said.
“The federal government releases provincial NFC stocks every fortnight and no outstanding liabilities exist in this regard,” the ministry said a day after Chief Minister Sohail Afridi demanded immediate release of all the outstanding dues.
The fiscal tussle between the Center and the provincial government is mostly related to the expenditure of the newly merged districts, which are outside the NFC area, until the over 5 million residents of these districts are treated as part of the NFC during the ongoing discussions under the 11th Commission.
KP has claimed that the Center owes it from over Rs 850 billion to over Rs 1.3 trillion due to a 4% increase in population after the 2018 merger.
But the finance ministry said it has regularly paid 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 an amount of Rs 46.5 billion was released to the government of Khyber-Pakhtunkhwa on December 17, underscoring the federal government’s compliance with timely disbursement obligations.
“The Ministry of Finance reaffirms the federal government’s continued commitment to ensure timely, transparent and sustained financial transfers to the province of Khyber-Pakhtunkhwa (KP) in line with the NFC Award and beyond, reflecting the federation’s commitment to support provincial development, fiscal stability and post-conflict rehabilitation,” it added.
Under the 7th NFC award, Khyber-Pakhtunkhwa’s share was fixed at 14.62% of the province’s share in the divisible pool. Recognizing the extraordinary burden borne by the province during the war on terror, an additional 1% of the undivided pool was allocated exclusively to KP.
Although the 7th NFC Award was originally planned 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 Ministry of Finance. Accordingly, KP 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 Rs 5.9 trillion has been transferred to KP as its share of the divisible pool. It said that during the same period, Rs 705 billion has been given to KP due to the war on terror, reflecting federal recognition of the province’s sacrifices and responsibilities.
Another over Rs 117 billion has been provided to KP over the years to support IDPs who were affected by the war on terrorism, according to the ministry.
For the 11th NFC, the Center has also formed committees that would try to reach agreement on several issues including allotment of KP’s share to over 5 million merged population and look into direct transfers etc.
The finance ministry said that from July 2010 to November 2025, an amount of Rs 482.8 billion has been transferred on account of royalties on oil and natural gas, gas development surcharge, excise duties on natural gas and other related heads.
Additional federal support beyond NFC, the ministry said over Rs 1.4 trillion, which is 18% of total transfers, is also given to KP beyond its share in NFC.
Following the merger of erstwhile FATA into KP following the 7th NFC Award, and in the absence of a revised NFC formula, the federal government has been funding the expenditure of the newly merged districts from its own NFC share, the finance ministry said. Since 2019, an amount of Rs 704 billion has been transferred to the provincial government under this head.
At the request of the Government of Khyber-Pakhtunkhwa, the first meeting of the Sub-Group on Newly Merged Districts is scheduled for 23 December 2025, with the Minister of Finance, Khyber-Pakhtunkhwa acting as the designated convener, demonstrating a cooperative and transparent approach to resolving outstanding tax issues.
The ministry said that despite constitutional devolution, the federal government continues to invest in provincial welfare and development, providing Rs115 billion to KP over the past 15 years from the federal PSDP for provincial development projects.
But the money that went to KP 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 Program (BISP), an amount of Rs 481.4 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 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.
