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

Khyber-Pakhtunkhwa Chief Minister Sohail Afridi expressed deep concern to Prime Minister Shehbaz Sharif over the federal government’s continued failure to release constitutionally guaranteed federal funds and warned that the province was facing an acute financial and governance crisis.

In a letter to the premier, CM Afridi said: “I am compelled to record the deep and growing concern of the government of Khyber-Pakhtunkhwa regarding the continued non-release of constitutionally guaranteed federal transfers, a failure that has now translated into an acute fiscal and governance crisis for the province.”

He highlighted that the provincialo budget for the current fiscal year was formulated based on constitutional rights, including net hydel profit, oil and gas royalties, shares after merger in the National Finance Commission (NFC) and routine monthly transfers under the National Finance Commission (NFC).

“These were not discretionary assumptions but binding fiscal commitments,” the Prime Minister said.

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

According to the letter, KP’s NFC entitlement of Rs658.4 billion was met with only Rs604b to date, creating a deficit of Rs54.4b. The chief minister described this as a “significant breach” affecting cash management, budget execution and service delivery across 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 delivery of essential public services and development interventions that have historically eroded the marginalized areas of these areas and national cohesion,” it says in the letter.

He also stressed that the fiscal restrictions came while the province was on the front lines against terrorism and continued to incur extraordinary expenses related to flood response and the rehabilitation and support of temporarily displaced persons – responsibilities that he noted were national in scope but financially borne “disproportionately and unsustainably” by the province.

“In light of the above, the KP government expects immediate corrective action from the federal government, including full and unconditional release of all outstanding federal dues, especially routine monthly NFC transfers, Net Hydel Profit, Oil and Gas Royalties, and allocations to the merged districts, strictly in accordance with constitutional provisions and agreed fiscal agreements, we will only strain the province’s governance capacity at a critical time,” the letter concluded.