Federal Govt Denies Outstanding Dues to Khyber-Pakhtunkhwa Amid NFC Award Dispute

"The federal government releases provincial NFC shares on a fortnightly basis, and no outstanding liabilities exist in this regard," the ministry said in a statement, as quoted by The Express Tribune, a day after KP Chief Minister Sohail Afridi demanded immediate clearance of alleged pending payments.

The dispute largely centres on expenditures for the newly merged districts, which remain outside the NFC framework until the population of over five million in these areas is formally incorporated during deliberations of the 11th NFC Commission.

KP has claimed that the Centre owes between PKR 850 billion and PKR 1.3 trillion due to a four per cent population increase following the 2018 merger, The Express Tribune reported.

Rejecting these claims, the finance ministry said all dues have been paid regularly since the 7th NFC Award became operational in 2010.

It noted that from July 2010 to November 2025, PKR 5.9 trillion was transferred to KP from the divisible pool, and an additional PKR 705 billion was provided as compensation for the war on terror, according to The Express Tribune.

The finance ministry further said over PKR 117 billion was allocated to support internally displaced persons affected by terrorism-related operations, while PKR 482.8 billion was transferred during the same period under various heads, including oil and gas royalties, gas development surcharge and excise duty on natural gas.

Under the 7th NFC Award, KP's share was fixed at 14.62 per cent of the provincial share in the divisible pool, along with an additional one per cent of the undivided pool in recognition of the province's role in the war on terror, as reported by The Express Tribune.

Due to the lack of consensus on subsequent awards, the 7th NFC framework continues to be implemented.

The ministry said that beyond NFC transfers, over PKR 1.4 trillion -- around 18 per cent of total transfers -- has been provided as additional federal support to KP. Following the merger of the former Federally Administered Tribal Areas (FATA) regions, the federal government has also financed expenditures for the newly merged districts from its NFC share, transferring PKR 704 billion since 2019, as reported by The Express Tribune.

To resolve outstanding issues, the Centre has formed committees under the 11th NFC, including one focusing on the merged districts. The first meeting of the relevant subgroup is scheduled for December 23, 2025, with the KP finance minister serving as convener.

The finance ministry added that despite constitutional devolution, the federal government has continued to invest in the province, allocating PKR 115 billion from the federal Public Sector Development Programme (PSDP) over the past 15 years. Additionally, PKR 481.4 billion has been spent in KP under the Benazir Income Support Programme between FY2016 and FY2025, The Express Tribune reported.

Reaffirming its stance, the ministry said the federal government remains committed to equitable resource distribution, fiscal federalism and sustained financial support for Khyber Pakhtunkhwa, particularly in light of the province's security challenges and post-conflict rehabilitation needs.

- ANI