PESHAWAR: The Khyber Pakhtunkhwa (KP) government has demanded the immediate and predictable release of federal funds, warning that continued shortfalls are affecting service delivery in merged districts and putting the province’s fiscal targets for FY2025–26 at serious risk.
The KP government has warned that continued shortfalls in federal releases pose an immediate and serious risk to achieving the budgeted surplus of Rs157 billion.
Adviser to the Chief Minister on Finance, Muzammil Aslam, has written a formal letter to the federal finance minister, highlighting persistent and significant shortfalls in federal transfers and revenue releases during the first six months of the current fiscal year.
According to the letter, the province budgeted a surplus of Rs157 billion for FY2025–26 strictly on the assumption that all federal transfers and releases would be made fully and in line with approved timelines. Any deviation from these assumptions, the letter states, directly undermines fiscal discipline and the province’s ability to achieve its budgeted surplus.
The document states that the total KP budget for merged districts in FY2025–26 is Rs292 billion, comprising Rs143 billion for current expenditure, Rs40 billion under the ADP, Rs50 billion under the Accelerated Implementation Programme, Rs17 billion for TDPs, and Rs43 billion under the NFC share. However, actual releases to date amount to only Rs56 billion, which is approximately 19 percent of the annual allocation.
Despite zero federal release under the AIP, the KP government has released Rs26.4 billion from its own resources. Similarly, against a federal release requirement of Rs16.4 billion, the province has released Rs8.9 billion to sustain development momentum. For the current expenditure of merged districts, Rs63 billion has been spent, while federal releases stand at only Rs46 billion, resulting in a shortfall of Rs17 billion.
The letter further points out serious shortfalls in straight transfers, where, against an annual budgeted provision of Rs115 billion, actual releases to date are only Rs19 billion, representing around 17 percent of the annual target.
Shortfalls in the divisible pool have further aggravated the situation. KP’s share in federal tax assignments for the first six months was projected at Rs643 billion, including the one percent war on terror share, while actual receipts amount to Rs567 billion, reflecting a shortfall of Rs76 billion.
Similarly, against a Net Hydel Profit budget of Rs106 billion, the province has received only Rs18 billion during the first six months, again approximately 17 percent of the annual estimate.
These revenue constraints have been further compounded by unavoidable expenditures, including Rs28 billion incurred on flood response and rehabilitation, and an additional Rs7 billion spent on internally displaced persons, placing further strain on the provincial budget.
The KP government has warned that continued shortfalls in federal releases pose an immediate and serious risk to achieving the budgeted surplus of Rs157 billion and has called for urgent corrective action, including timely and predictable realisation of federal transfers in line with budgeted assumptions.
