ISLAMABAD: The finance ministry on Saturday clarified that the federal government had no outstanding liabilities under the National Finance Commission (NFC) to the provinces, stating that provincial NFC shares were released on a fortnightly basis.
The clarification comes after assertions by Khyber-Pakhtunkhwa (KP) Chief Minister Sohail Afridi that the Centre has failed to pay Rs1,350 billion to the province under the NFC Award over the past seven years.
“The federal government disburses funds to the provinces under the NFC every 15 days, and there are no outstanding liabilities in this regard,” the ministry said in a statement.
The finance ministry noted that KP’s share was determined at 14.62pc of the provincial share in the divisible pool under the 7th NFC Award, along with 1pc of the undivided divisible pool “in recognition of the extraordinary burden borne by the province during the war on terror”.
“Although the 7th NFC Award was originally envisaged for a five-year period, the absence of consensus on subsequent NFC Awards (8th, 9th, and 10th) necessitated the continued implementation of the 7th NFC Award framework,” it stated.
Due to the absence of subsequent awards, KP continues to receive its share, including the additional allocation for the war on terror under the 7th NFC Award, the ministry added.
An amount of Rs46.44 billion was released to the KP government on December 17, the ministry said, adding that the release of funds underscored the federal government’s adherence to timely disbursement commitments.
The finance ministry noted that the federal government has transferred Rs5.86 trillion to the KP government as its share of the divisible pool, and Rs705 billion on account of the war on terror from July 2010 to November 2025.
Additionally, it said, the government has released Rs482.78 billion in royalties on oil and natural gas, gas development surcharge, excise duty on natural gas and other related heads.
According to the finance ministry, the federal government had been financing the expenditures of the newly merged districts from its own NFC share following the merger of former FATA into KP. Since 2019, Rs704 billion have been transferred to the KP government for the merged districts, it said. The finance ministry noted that the federal government had allocated funds for the ex-FATA from its share due to the absence of a revised NFC formula after the 7th NFC Award.
An additional Rs117.16 billion has been provided to KP over the years to support internally displaced persons (IDPs), the ministry stated.
The funds transferred to KP include Rs115 billion for provincial welfare and development over the past 15 years from the federal PSDP, and Rs481.43 billion through the Benazir Income Support Programme (BISP) from fiscal year 2016 to fiscal year 2025.
The ministry also noted the decisions made during the inaugural meeting of the 11th NFC on December 4.
“It was decided to constitute a dedicated sub-group to make recommendations on the merger of former FATA/newly merged districts and their share in the divisible pool,” it stated.
The first meeting of the sub-group, requested by the KP government, is scheduled for December 23 under the chair of KP finance minister, the ministry added.
However, Chief Minister Sohail Afridi Saturday said Khyber-Pakhtunkhwa was not receiving its constitutionally mandated financial share in full and added that outstanding dues owed by the federal government to the province had exceeded Rs4.5 trillion. These, he said, included hydel power arrears, promised allocations for merged districts, net hydel profits and other financial liabilities.
He said the federal government’s control over provincial resources and non-payment of outstanding dues were the biggest obstacles to development in the province.
“If the federal government releases Khyber Pakhtunkhwa’s legitimate arrears immediately, it would not only put the province but the entire country on a new path of development,” he said while addressing an annual parent’s day ceremony at the Mardan Girls’ Cadet College as the chief guest.
The chief minister distributed medals and trophies among cadets who secured top positions in academic and co-curricular competitions. He announced the establishment of a Girls’ Cadet College in Khyber district. He also announced the provision of funds for the completion of under-construction building of Girls’ Cadet College, Mardan.
The chief minister said that economic stability was not possible without political stability. He urged teachers to educate students about the province’s financial and constitutional rights.
Afridi said a total of Rs4,500 billion was payable to KP by the federation. “The federation has control over our resources and we are resolving unlimited problems with limited resources,” he said, adding that while the former Fata was administratively merged, they were not merged financially.
He said that delays in the release of funds by the federation were increasing the cost of development projects. “If our outstanding dues are paid, we can further increase investment in our people,” he added. The chief minister said that Khyber Pakhtunkhwa was providing cheaper electricity to the country, but due to agreements with Independent Power Producers (IPPs), the public was being supplied expensive electricity.
Separately, responding to the federal government regarding the release of funds to KP, Adviser to Chief Minister on Finance Muzzammil Aslam said on Saturday that federal figures could not be disputed; however, payments were made below the amount actually due.
He said that approximately Rs4 trillion was payable to KP by the federal government, which included Net Hydel Profit (NHP), straight transfers and dues of the merged districts.
In a statement issued from his office, he said that payments of Net Hydel Profit (NHP) to Khyber Pakhtunkhwa were delayed, while the windfall levy had still not been included in straight transfers. Aslam added that the federal excise duty on petroleum had not been included for Khyber Pakhtunkhwa, and the excise duty imposed on gas had never been revised.
He said that excise duty on tobacco is still being collected by the federal government, despite agriculture having been devolved to the provinces. The adviser stated that even after the merger of Fata, the Seventh NFC Award had not been updated, and the merged districts were still being given a special grant, which was less compared to other special regions such as Gilgit-Baltistan and Kashmir.
Aslam said that even from the allocated budget for the merged districts, full payments were not received except for the year 2024-25, and that even half of the promised additional 3 percent share of Rs100 billion in development funds promised in 2018 had not been provided.
He said that under the AIP (Accelerated Implementation Programme), only Rs168 billion had been received so far against Rs700 billion. He added that in the current year alone, more than Rs50 billion less has been allocated for the current expenditures of the merged districts. Aslam stated that due to the non-implementation of the Seventh NFC Award, an estimated Rs1,375 billion less had been received since 2018-19. He said that not a single rupee out of the promised Rs17 billion for internally displaced persons (IDPs) had been released to Khyber Pakhtunkhwa.
Aslam said that the Khyber Pakhtunkhwa government had spent more than Rs11 billion on IDPs from its own budget and expressed the hope that these details would be helpful to the federal government.
