Khyber Pakhtunkhwa Finance Advisor Critiques Federal Budget Allocation

In a recent press conference held on June 14, 2025, Muzammil Aslam, the Finance Advisor for Khyber Pakhtunkhwa (K-P), voiced strong criticism of the federal government for allegedly neglecting the province's development needs. Aslam asserted that the federal budget for K-P was disproportionately low, with the province receiving only Rs550 million in development funds. He attributed this oversight to the province's political opposition status, claiming that federal economic instability, marked by a growth rate decline to 2.7%, has further exacerbated the situation.

Aslam highlighted that K-P has successfully achieved 93% of its revenue targets through internal sources, underscoring the province's fiscal resilience despite federal shortcomings. He expressed concern that K-P received Rs90 billion less than its entitled share under the National Finance Commission (NFC) framework, compelling the provincial government to allocate Rs20 billion from its own treasury for tribal areas and to utilize Rs70 billion for merged districts without any federal assistance. He clarified that the province has not incurred new loans, stating that existing loans stem from previous agreements, with future borrowing solely intended for major development initiatives.

In comparing budgetary allocations, Aslam noted that the federal government's budget stands at Rs1 trillion while K-P's budget is significantly lower at Rs547 billion. He revealed that an NFC meeting is scheduled for August at K-P's request, where the chief minister will address overdue payments from the federal government, which have resulted in an annual shortfall of over Rs47 billion for tribal areas. Despite these challenges, Aslam acknowledged the federal government's allocation of Rs70.4 billion for merged tribal districts as a positive development.

Furthermore, Aslam indicated that K-P has inherited Rs170 billion in loans from previous administrations, but has established a Rs1.5 billion fund to manage debt repayments effectively. He reassured the public that the province remains content with its NFC share, viewing it as a critical component in overcoming fiscal challenges. He revealed that salaries and pensions have been adjusted upwards by 10% and 7%, respectively, in accordance with federal guidelines.

For the upcoming fiscal year, K-P has earmarked Rs500 billion in development schemes as part of its Rs195 billion development budget. Aslam reported that out of the allocated Rs156 billion for settled districts, Rs145 billion has already been disbursed, while Rs41 billion is designated for merged tribal areas, with Rs26.9 billion already released. He lauded this initiative as the largest development budget in K-P’s history.

Aslam concluded by reflecting on the province's financial management, noting that the 'throw-forward liabilities' which previously extended over ten years have now been reduced to 5.1 years, indicating a positive trend in K-P’s fiscal health. The ongoing fiscal negotiations and budget adjustments between K-P and the federal government will be critical as the province seeks to foster sustainable development amid challenging economic conditions.