ISLAMABAD: Khyber Pakhtunkhwa, which remains structurally dependent on federal transfers, will launch a six-year World Bank-supported programme to strengthen its fiscal system and lay the foundation for improved service delivery.
The World Bank is expected to approve a $200 million loan from the International Development Association (IDA) later this month to fund the programme’s expenditure framework for fiscal years 2027-32. The programme’s total financing is estimated at $650m, with the remaining amount to be provided by the KP government.
Interventions related to taxation in the merged districts and former Provincially Administered Tribal Areas (Pata) are excluded from the Programme-for-Results (PforR) financing boundary because the provincial government has extended their tax-exempt status. The programme’s $20m investment project financing component will provide technical assistance in these areas.
The primary beneficiaries of the Public Resources for Inclusive Development (PRID) Multiphase Programmatic Approach for KP are the province’s 41 million residents, who are expected to benefit from better-resourced and more efficient public services. Direct beneficiaries include recipients of improved healthcare and education services.
World Bank is expected to approve $200m loan for revenue mobilisation, fiscal management and service delivery
Taxpayers and businesses, including more than 700,000 property owners, around 10,000 agricultural income taxpayers, and over one million vehicle owners, are expected to benefit from more transparent, service-oriented tax administration.
In the health sector, an estimated 1.3 million people are expected to benefit from improved services at rural health centres. In education, better planning, budgeting and service delivery are expected to benefit about 3.7 million pupils enrolled in public primary schools across the province, including 2.1 million boys and 1.6 million girls.
Private investors are expected to benefit from access to better statistics and improved tax administration services. More broadly, improved mobilisation of own-source revenue (OSR), stronger public financial management (PFM) and evidence-based policymaking and planning are expected to align resource allocation more closely with provincial needs, ultimately improving the quality and equity of public services and investment across KP.
The province’s socio-economic outlook points to fiscal vulnerability and poor development outcomes. KP remains structurally dependent on federal transfers, while OSR finances a small and declining share of rapidly rising expenditure. Inflexible salary and pension obligations dominate spending, leaving less room for public investment.
Since 2022, expenditure has risen due to higher salary and pension costs, the absorption of the merged districts, inflation, and an expanded Annual Development Programme (ADP), which also covers the salaries and allowances of contract and project staff. In fiscal year 2025, 35.3 per cent of the population lived below the national poverty line. About 40pc of children under five were stunted, 36pc of school-age children were out of school, and only 58pc were fully immunised.
According to a document on the programme, the KP government has expanded the sales and property tax bases, improved taxpayer compliance and strengthened tax administration. Measures include digitising stamp duty and property tax records in 12 cities and partially integrating revenue databases.
However, several constraints continue to hamper OSR mobilisation. These include a narrow tax base that leaves property, agriculture and large parts of the services sector outside effective taxation; fragmented revenue administration across three provincial agencies with overlapping mandates and limited data sharing; and inadequate digital capacity for registration, filing, assessment and enforcement.
Published in Dawn, October 11th, 2026
