Federal govt rejects KP claims of stalled NFC funds

The federal government on Saturday rejected claims that it had withheld funds from Khyber-Pakhtunkhwa, saying the province has been receiving its full share under the National Finance Commission Award through regular fortnightly transfers and that no outstanding liabilities exist.

The clarification followed accusations by Khyber-Pakhtunkhwa Chief Minister Sohail Afridi that federal funds, particularly for the merged tribal districts, had been stalled, with alleged arrears running into Rs 2,200 billion.

Speaking while chairing the 43rd provincial cabinet meeting in Peshawar, Afridi accused the federal government of delaying the release of NFC funds for the fiscal year 2025-26, saying the non-release had disrupted development projects in the merged districts. He said the province’s NFC share for the current fiscal year had not been released so far, despite Khyber-Pakhtunkhwa meeting its constitutional obligations.

Finance Ministry outlines allocations

In response, the Ministry of Finance said that under the 7th National Finance Commission Award, Khyber-Pakhtunkhwa’s share in the divisible pool was fixed at 14.62%, with an additional one percentage point allocated to compensate for the province’s role in the war on terrorism. It said the award continues to be implemented as provinces have yet to reach consensus on subsequent NFC arrangements.

As evidence of the regular transfer mechanism, the ministry said Rs 46.44 billion was released to Khyber-Pakhtunkhwa on December 17, 2025, in line with the routine fortnightly disbursement schedule under the NFC framework.

According to official figures, Khyber-Pakhtunkhwa received Rs 5,867 billion as its NFC share between July 2010 and November 2025. An additional Rs 705 billion was provided during the same period to cover costs linked to the war on terrorism.

Read: Can war against terror be won without political consensus?

Following the merger of the former Federally Administered Tribal Areas with Khyber-Pakhtunkhwa, the federal government transferred Rs 704 billion from its share between 2019 and 2025 to meet administrative and development expenditures in the newly merged districts.

Beyond NFC allocations, the province received Rs 482.78 billion through constitutionally mandated straight transfers, including royalties on oil and gas, gas development surcharge, excise duty on natural gas and other federal revenue streams.

The ministry said additional federal support included Rs 117.166 billion provided for internally displaced persons, Rs 115 billion released for provincial development projects under the Public Sector Development Programme, and Rs 481.433 billion disbursed in conditional and unconditional cash transfers under the Benazir Income Support Programme between fiscal years 2016 and 2025.

The ministry clarified that PSDP allocations are linked to project approval and progress and fall outside the NFC divisible pool, adding that delays in PSDP releases cannot be treated as provincial arrears.

Federal government highlighted that the figures demonstrate that federal financial obligations to K-P have been met in full and consistently, debunking claims of stalled or withheld funds.

Read More: FATA Jirga in Tirah rejects K-P merger

The ministry said the establishment of the 11th NFC on August 22, 2025, reflects the federal government’s commitment to resolving outstanding issues through consultation, adding that a sub-group has been formed to examine the financial implications of the merger of former FATA.

The federal government reiterated its commitment to fiscal federalism and equitable resource distribution, saying provincial needs related to security, rehabilitation, integration and development would continue to be addressed through established constitutional mechanisms.