The Khyber Pakhtunkhwa government has declined to accept a proposed Rs6.4 billion reduction in its federal financial transfers suggested by the central government. Chief Minister Sohail Afridi stated that the federal authorities had requested an additional sum from KP prior to the budget announcement, linking the release of funds to a meeting with PTI founder Imran Khan and his approval.
CM Afridi emphasized that his provincial administration did not sign any memorandum of understanding regarding the extra amount, as permission to meet Imran Khan was not granted. He further noted that if the Federal Board of Revenue (FBR) meets its target of Rs15,260 billion, KP’s share would total Rs175 billion.
In the lead-up to the Budget 2026-27 approval, Finance Minister Muhammad Aurangzeb explained that provinces had extended a grant to the federal government to support defense needs and to mitigate secondary effects of the ongoing conflict in the Gulf region. He clarified that this three-year arrangement was separate from the National Finance Commission (NFC) framework.
Notably, CM Afridi highlighted another condition concerning the merged districts receiving their rightful allocation in the 11th NFC award. The federal government agreed to this, incorporating it into the National Economic Council’s agenda. It was also resolved that if the merged districts’ share was not disbursed within six months, a summary would be prepared to issue an ordinance under the 7th NFC provisions.
The additional federal grant was not factored into KP’s provincial budget for 2026-27. On August 5, the Ministry of Finance proposed directly deducting Rs6.4 billion owed to KP, a move the provincial government neither approved nor accepted. This opposition was formally communicated by KP’s Finance Department in a letter dated August 13.
CM Afridi stressed that the dispute transcended political differences, centering on the province’s constitutional and financial entitlements. Following the proposal, Finance Adviser Muzammil Aslam promptly engaged with officials from the Accountant General Khyber Pakhtunkhwa, resulting in written directives forbidding any deductions without provincial consent. Similarly, the Accountant General Pakistan Revenues was instructed not to process any transactions lacking explicit approval from KP’s government.
He underscored that Article 164 of the Constitution does not authorize the federal government to unilaterally withhold funds owed to provinces; any such deduction must have a clear legal or constitutional foundation and require provincial agreement.
In a significant development, the KP government has filed a petition with the Federal Constitutional Court to assert its constitutional rights under the NFC award. The provincial administration is committed to pursuing all legal and constitutional measures to safeguard its financial share, with CM Afridi affirming that KP will not compromise on its NFC entitlements.
