CM Afridi warns PM delays in NFC transfers pushing K-P into ‘acute fiscal, governance crisis’

Khyber-Pakhtunkhwa Chief Minister Sohail Afridi expressed deep concern to Prime Minister Shehbaz Sharif over the federal government’s persistent failure to release constitutionally guaranteed federal funds, warning that the province faced an acute fiscal and governance crisis.

In a letter addressed to the premier, CM Afridi said, “I am compelled to place on record the deep and mounting concern of the Government of Khyber-Pakhtunkhwa regarding the persistent failure to release constitutionally guaranteed federal transfers, a failure that has now translated into an acute fiscal and governance crisis for the province.”

He highlighted that the provincialo budget for the current fiscal year was formulated based on constitutional entitlements, including net hydel profit, oil and gas royalties, post-merger shares in the National Finance Commission (NFC), and routine monthly transfers under the NFC.

“These were not discretionary assumptions but binding fiscal obligations,” the chief minister stated.

He noted that actual federal releases had “consistently fallen short” of budgeted levels. CM Afridi underscored that the withholding of routine monthly NFC transfers, was unconstitutional and detrimental to cooperative federalism.

According to the letter, K-P’s NFC entitlement of Rs658.4 billion was met with only Rs604b to date, creating a shortfall of Rs54.4b. The chief minister described this as a “material breach” affecting cash management, budget execution and service delivery across critical sectors.

“The impact is most stark in the merged districts, where development, stabilisation, and state consolidation are acknowledged national priorities. Despite a provincial allocation of Rs292b, federal releases amount to only Rs56b thus far. This severe and continuing gap has undermined the provision of essential public services and development interventions in these historically marginalised areas, eroding the objectives of the merger and weakening national cohesion,” the letter reads.

He also emphasised that the fiscal constraints came while the province was on the frontline against terrorism and continued to shoulder extraordinary expenditures related to flood response and rehabilitation, and the support of temporarily displaced persons – responsibilities that he noted were national in scope but financially borne “disproportionately and unsustainably” by the province.

“In view of the above, the Government of K-P expects immediate corrective action by the Federal Government, including the full and unconditional release of all outstanding federal dues, particularly routine monthly NFC transfers, net hydel profit, oil and gas royalties, and allocations for the merged districts, strictly in accordance with constitutional provisions and agreed fiscal arrangements. Any further delay will only compound the province’s fiscal stress and weaken governance capacity at a critical juncture,” the letter concluded.

Also Read: NFC shortfall puts K-P’s IMF pledge on a fiscal cliff

As the NFC award politics heats up, the federal government last month said that it has disbursed Rs7.8 trillion to K-P in the past 15 years, including Rs1.4tr over and above the NFC share. There are no outstanding liabilities of the provincial government towards the Centre and the latest tranche of Rs46.5b under the NFC was disbursed on December 17, said the Ministry of Finance.

“The federal government releases provincial NFC shares on a fortnightly basis, and no outstanding liabilities exist in this regard,” said the ministry a day after CM Afridi demanded immediate release of all the outstanding dues in December, 2025.

The fiscal dispute between the Centre and the provincial government is mostly related to the spending on the newly merged districts, which is outside the purview of the NFC until the over five million population of these districts is treated as part of the NFC during the on-going discussions under the 11th Commission.

The K-P has been claiming that the Centre owes it from over Rs850b to over Rs1.3tr on account of a 4% increase in population after the merger in 2018. But the finance ministry said that it has been regularly paying all the outstanding dues to the provincial government, which amounted to Rs7.8tr since 2010 when the 7th NFC became operational.

“The Ministry of Finance reaffirms the federal government’s continued commitment to ensuring timely, transparent, and sustained financial transfers to the Province of Khyber-Pakhtunkhwa in accordance with the NFC Award and beyond, reflecting the federation’s resolve to support provincial development, fiscal stability, and post-conflict rehabilitation,” it added.

Meanwhile, K-P Governor Faisal Kundi criticised the provincial leadership over the resurgence of terrorism in the region. Taking to X, he said, “If a peaceful province was handed over to the provincial government in 2013 and today it is once again in the grip of terrorism, then who is responsible if not the provincial leadership?”

He further condemned claims by the K-P CM that intelligence-based operations are underway without the government’s approval, adding, “If the chief executive is unaware of what is happening in his own province, then that is not just incompetence; it is an open admission of a complete collapse in governance.”

Governor Kundi advised the CM Afridi to “end the rhetorical theatrics,” emphasising that the people of the province, particularly in Tirah and Kurram, “do not need speeches; they need leadership.” He stressed that the government’s priority must be ensuring security and the immediate rehabilitation of IDPs, rather than engaging in political drama and chaos.