The Ministry of Finance has issued a comprehensive statement reaffirming the federal government's unwavering commitment to the timely and transparent transfer of financial resources to the Province of Khyber Pakhtunkhwa (KP). This commitment, grounded in the National Finance Commission (NFC) Award and extended through additional support mechanisms, aims to bolster provincial development, ensure fiscal stability, and aid in post-conflict rehabilitation.
Substantial Financial Transfers Under NFC Award
According to the official release, Khyber Pakhtunkhwa's share under the 7th NFC Award stands at 14.62 percent of the provincial share from the divisible pool. In a significant acknowledgment of the province's sacrifices, an extra 1 percent of the undivided divisible pool is allocated exclusively to KP due to the extraordinary burdens it shouldered during the War on Terror.
Although the 7th NFC Award was initially set for a five-year term, the lack of consensus on subsequent awards (8th, 9th, and 10th) has led to its continued implementation. The federal government emphasizes that it releases provincial NFC shares every two weeks and confirms there are no outstanding liabilities. A recent disbursement of Rs. 46.44 billion was made to the KP government on 17 December 2025.
The cumulative data is striking. From July 2010 to November 2025, a total of Rs. 5,867 billion has been transferred to KP as its rightful share from the divisible pool. During this same period, an additional Rs. 705 billion has been provided specifically on account of the War on Terror, reflecting federal recognition of the province's unique challenges.
Beyond NFC: Straight Transfers and Special Support
The financial support extends well beyond the NFC framework. The federal government has also ensured the uninterrupted flow of straight transfers to the province. These include funds for royalties on oil and natural gas, gas development surcharge, and excise duty on natural gas, amounting to Rs. 482.78 billion from July 2010 to November 2025.
Recognizing KP's distinct administrative and fiscal hurdles, Islamabad has provided substantial extra support:
- Newly Merged Districts (NMDs): Following the merger of the former FATA after the 7th NFC Award, and in the absence of a new NFC formula, the federal government has been financing NMD expenditures from its own NFC share. Since 2019, Rs. 704 billion has been transferred for this purpose.
- Internally Displaced Persons (IDPs): An extra Rs. 117.166 billion has been allocated over the years to support IDPs in the province.
- Federal PSDP Projects: Despite constitutional devolution, the federal government has invested Rs. 115 billion in KP over the past fifteen years through the Federal Public Sector Development Programme for provincial-level development projects.
- Benazir Income Support Programme (BISP): From Fiscal Year 2016 to FY 2025, a sum of Rs. 481.433 billion has been spent in KP on Unconditional and Conditional Cash Transfers, offering crucial social protection to vulnerable households.
Path Forward: The 11th NFC and Collaborative Resolution
The finance ministry's statement highlighted ongoing efforts to strengthen the fiscal framework through dialogue. The 11th National Finance Commission was constituted by the President of Pakistan on 22 August 2025 and held its first meeting on 4 December 2025.
A key outcome was the decision to form a dedicated Sub-Group to recommend a solution for the integration of the Newly Merged Districts and their share in the divisible pool. Demonstrating a collaborative approach, the first meeting of this Sub-Group is scheduled for 23 December 2025, with the Finance Minister of Khyber Pakhtunkhwa serving as its convener.
The ministry reiterated the federal government's full commitment to equitable resource distribution and fiscal federalism. It pledged sustained support for Khyber Pakhtunkhwa to ensure that provincial needs, especially those stemming from security challenges, displacement, and administrative integration, are addressed responsibly and promptly.
