PESHAWAR, June 17: The federal government has agreed to provide additional budgetary support to the NWFP to help rescue the Muttahida Majlis-i-Amal government facing a huge fiscal deficit.

A provincial government spokesman told Dawn that Prime Minister Mir Zafarullah Khan Jamali in an hour-long meeting with NWFP Chief Minister Akram Khan Durrani in Islamabad on Wednesday agreed to uncap the net profits from hydropower generation that had been frozen at Rs6 billion since 1991.

He said the federal government had agreed to enhance the profit from hydropower generation to Rs8 billion. NWFP Finance Minister Sirajul Haq had earlier warned that the provincial government faced a deficit of Rs8 billion and it would not be able to present its budget due to acute financial problems.

The minister is scheduled to present the budget on June 18. The spokesman the prime minister agreed to provide Rs3.4 billion in subvention to the NWFP for the next financial year.

The federal government had stopped subventions to the provinces from the next financial year. With the new pledges by the federal government, the provincial government will now be able to overcome its deficit.

It hopes to get $90 million social structural credit from the World Bank, whose board of directors is meeting on June 22 to approve the programme. Federal Finance Minister Shaukat Aziz and the finance secretary were also present during the meeting between the prime minister and the chief minister.