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• Finance ministry denies dues, says transfers are released fortnightly
• Insists Rs46.44bn paid to province on Dec 17
• KP finance adviser claims nearly Rs4tr outstanding in total dues
• Cites arrears in net hydel profit, straight transfers, merged districts’ support
ISLAMABAD: At a time when the federal government has initiated negotiations on the 11th National Finance Commission (NFC) Award, a fresh dispute has emerged between the federal Ministry of Finance and the Khyber Pakhtunkhwa government over the release of the province’s share under the current award.
After KP Chief Minister Sohail Afridi alleged on Friday that the federal government had withheld KP’s rightful share from the divisible pool, the finance ministry issued a two-page statement on Saturday defending its position. It said transfers to KP were being made regularly and were aimed at supporting the province’s development agenda, fiscal sustainability and post-conflict recovery.
The ministry said provincial NFC shares were being released on a fortnightly basis and that there were no pending liabilities against the federal government. “Most recently, an amount of Rs46.44bn was disbursed to the KP government on Dec 17, 2025,” it said.
Soon after the statement, KP’s Adviser on Finance Muzzammil Aslam claimed the federation still owed the province nearly Rs4 trillion, citing outstanding dues under net hydel profit (NHP), straight transfers and financial support linked to the merged tribal districts.
Federal figures on transfers
The finance ministry also released figures for transfers to KP under the 7th NFC Award since its inception. It said that between July 2010 and November 2025, KP received Rs5.867tr as its share from the divisible pool. It added that Rs705bn was allocated to KP during the same period under the head of war on terrorism.
The ministry also said straight transfers to KP had continued without interruption. Between July 2010 and November 2025, it said, Rs482.78bn was disbursed under various heads, including royalties on oil and natural gas, the gas development surcharge, excise duty on natural gas and other related payments.
In addition, it said the federal government had provided support beyond the NFC framework due to KP’s unique fiscal and administrative challenges. Following the merger of the former Fata into KP, and in the absence of a revised NFC formula, it said the federal government had continued to fund expenditures in the newly merged districts from its own NFC share.
The ministry said that since 2019, Rs704bn had been transferred to KP for the newly merged districts. It added that Rs117.166bn had been allocated over the years for internally displaced persons (IDPs) in the province.
It also said Rs115bn had been allocated to KP over the past 15 years under the federal Public Sector Development Programme (PSDP) for projects of a provincial nature.
Separately, the ministry said that under the Benazir Income Support Programme (BISP), Rs481.433bn was disbursed in KP from FY16 to FY25 under unconditional and conditional cash transfers.
KP disputes ‘rightful share’
Mr Aslam said the figures shared by the finance ministry were not in dispute but argued that KP’s entitlements had not been fully met.
He cited overdue payments under NHP and said KP’s share was not fully reflected in certain straight transfers, including the windfall levy, the federal excise on petroleum and the long-pending revision of excise duty on gas.
He also said the federal government continued to collect excise duty on tobacco despite agriculture being a devolved subject under the Constitution. He claimed special grants for the merged districts were comparatively lower than those provided to other special regions such as Gilgit-Baltistan and Azad Jammu and Kashmir.
Mr Aslam said budgeted allocations for the merged districts were not fully disbursed, except in FY2024-25. He added that under a 2018 commitment of an additional three per cent share, or Rs100bn annually, under the Accelerated Implementation Programme (AIP), KP had received Rs168bn out of the pledged Rs700bn.
He said that in the current year, over Rs50bn less had been allocated for current and development spending in the merged areas. He also claimed that due to the non-graduation of the 7th NFC Award, KP had received an estimated Rs1.375tr less than its due share since 2018-19.
On IDPs, he said the federal government had committed an estimated Rs17bn over the past three years but “not a single rupee” had been released, adding that KP had spent more than Rs11bn from its own budget.
11th NFC talks
A key decision of the first meeting on the 11th NFC Award was the formation of a sub-group to recommend how the newly merged districts should be integrated and assigned a share in the divisible pool. The first meeting of the sub-group is scheduled for Dec 23, with the KP finance minister serving as convener.
Under the 7th NFC Award, KP’s share was fixed at 14.62pc of the provincial share in the divisible pool. In recognition of the burden borne by KP during the war on terrorism, an additional 1pc of the undivided divisible pool was allocated exclusively to the province.
Published in Dawn, December 21st, 2025
