Islamabad, January 26, 2026 — Khyber-Pakhtunkhwa (K-P) Chief Minister Sohail Afridi is accusing the federal government of a constitutional breach, claiming over Rs54 billion in promised funds haven’t materialized—a shortfall that’s pushing the province toward a full-blown fiscal crisis. It’s a familiar standoff, but this time, Afridi is putting the dispute in stark terms, warning of severe consequences for essential services and development projects.
Province Warns of Governance Collapse Amid Funding Dispute
Khyber-Pakhtunkhwa’s chief minister says withheld federal funds threaten essential services and regional stability.
- K-P alleges the federal government has failed to release constitutionally guaranteed funds, creating a Rs54.4 billion shortfall.
- The dispute centers on funding for merged districts, net hydel profit, and routine NFC transfers.
- Governor Faisal Kundi criticized the provincial leadership over the resurgence of terrorism in the region.
- The federal government maintains it has disbursed Rs7.8 trillion to K-P over the past 15 years.
Q: What’s at the heart of this dispute?
A: The core issue is the federal government’s alleged failure to release funds constitutionally owed to Khyber-Pakhtunkhwa, impacting the province’s ability to deliver essential services and maintain fiscal stability.
In a strongly worded letter to Prime Minister Shehbaz Sharif, Afridi stated, “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.” The provincial budget, he emphasized, was built on the expectation of these funds, including net hydel profit, oil and gas royalties, and allocations from the National Finance Commission (NFC).
According to the letter, K-P was entitled to Rs658.4 billion from the NFC, but has only received Rs604 billion to date. This shortfall, Afridi argues, isn’t just a budgetary inconvenience—it’s a “material breach” that’s crippling cash management and hindering service delivery. The impact is particularly acute in the newly merged districts, where development and stabilization are considered national priorities. While the province allocated Rs292 billion for these districts, federal releases have only reached Rs56 billion.
Afridi also pointed out that K-P is simultaneously grappling with the financial burden of combating terrorism, responding to floods, and supporting internally displaced persons—responsibilities he argues are national in scope but disproportionately funded by the province. He called for “immediate corrective action,” including the full and unconditional release of all outstanding dues.
The federal government, however, paints a different picture. Last month, officials stated they’ve disbursed Rs7.8 trillion to K-P over the past 15 years, including Rs1.4 trillion exceeding the NFC share. The Ministry of Finance asserted that there are no outstanding liabilities and that a recent tranche of Rs46.5 billion was released on December 17, 2025. “The federal government releases provincial NFC shares on a fortnightly basis, and no outstanding liabilities exist in this regard,” the ministry said.
The core of the disagreement appears to lie in funding for the merged districts, which aren’t fully integrated into the NFC formula until their population—over five million—is accounted for in the ongoing discussions for the 11th NFC Commission. K-P claims it’s owed between Rs850 billion and Rs1.3 trillion due to a 4 percent population increase following the 2018 merger, a claim the finance ministry disputes.
Meanwhile, K-P Governor Faisal Kundi criticized the provincial leadership, stating on X (formerly Twitter) on January 26, 2026, “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 also questioned the K-P CM’s claim that intelligence-based operations are being conducted without government approval, calling it “incompetence” or “an open admission of a complete collapse in governance.” Kundi urged Afridi to prioritize security and the rehabilitation of internally displaced persons over “political drama and chaos.”
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? If the chief executive of the province claims that intelligence- based operations are… pic.twitter.com/h6uaFQTLkd
— Faisal Karim Kundi (@fkkundi) January 26, 2026
As the debate over the NFC award intensifies, the financial standoff between Islamabad and Peshawar threatens to further destabilize a province already facing significant security and economic challenges.
