As political debate over the National Finance Commission (NFC) Award intensifies, the federal government has stated that it has transferred a total of Rs7.8 trillion to Khyber Pakhtunkhwa (KP) over the past 15 years, including more than Rs1.4 trillion beyond the province’s constitutional NFC share.
In a statement issued on Saturday, the Ministry of Finance said there are no outstanding NFC-related liabilities towards the KP government. It added that the latest tranche of Rs46.5 billion was released on December 17, reaffirming that provincial shares are disbursed on a fortnightly basis.
The clarification came a day after KP Chief Minister Sohail Afridi demanded the immediate release of what he described as pending dues. According to the ministry, all payments due under the NFC framework have been made regularly since 2010, when the 7th NFC Award became operational.
The core dispute between the Centre and KP largely revolves around expenditures in the newly merged districts. These areas, with a population exceeding five million, are currently outside the NFC formula and are under discussion in the ongoing deliberations of the 11th NFC Commission.
KP has repeatedly claimed that the federal government owes the province between Rs850 billion and Rs1.3 trillion, citing a 4% population increase following the 2018 merger of former FATA. However, the finance ministry maintained that all legitimate dues have been cleared and that KP has continued to receive its full entitlement.
Under the 7th NFC Award, KP’s share was fixed at 14.62% of the provincial share in the divisible pool. In addition, an extra 1% of the undivided divisible pool was allocated exclusively to KP in recognition of the heavy burden it bore during the war on terror. Although the award was originally meant for five years, the lack of consensus on subsequent awards has led to its continued implementation.
From July 2010 to November 2025, the Centre transferred Rs5.9 trillion to KP from the divisible pool, along with Rs705 billion under the war on terror head. An additional Rs117 billion was provided to support internally displaced persons affected by counterterrorism operations.
The ministry further stated that Rs482.8 billion was transferred during the same period in the form of oil and gas royalties, gas development surcharge, excise duty on natural gas, and related payments. Beyond NFC transfers, KP received over Rs1.4 trillion in additional federal support, amounting to nearly 18% of total transfers.
Following the merger of former FATA into KP, and in the absence of a revised NFC formula, the federal government has been financing the expenditures of the merged districts from its own NFC share. Since 2019, Rs704 billion has been transferred to KP under this arrangement.
To address outstanding issues, the Centre has formed committees under the 11th NFC Commission, including a sub-group on merged districts. Its first meeting is scheduled for December 23, 2025, with the KP finance minister serving as convener.
Despite constitutional devolution, the federal government said it has continued to invest in KP’s development. Over the past 15 years, Rs115 billion was allocated to KP from the federal PSDP for provincial-level projects. Additionally, Rs481.4 billion was disbursed in KP through the Benazir Income Support Programme (BISP) between FY2016 and FY2025 to support vulnerable households.
The Ministry of Finance reiterated its commitment to fiscal federalism, equitable resource distribution, and continued support for Khyber Pakhtunkhwa, particularly in view of the province’s security challenges, displacement issues, and administrative integration needs.