KP faces Rs155b shortfall due to unpaid obligations of centre

ISLAMABAD: Finance Minister of Khyber Pakhtunkhwa, Taimur Saleem Jhagra has said the provincial government would be facing a shortfall of Rs155 billion due to unpaid obligations of the federal government.

During an interaction with media, KPK Finance Minister Taimur Saleem Jhagra said that Rs155 billion shortfall included Rs2.5 for newly-merged districts current budget, development budget shortfall Rs22 billion, NFC share in federal tax collection Rs22.4 billion, NHP Rs61.2 billion and Rs25.9 billion and last quarter NMDs Rs20.4 billion of 2021-22.

Grants for Temporarily displaced persons (TDPs) were reduced from Rs. 17 billion to zero, he added.

Additionally, he said that ex-FATA’s budget was reduced after the merger and the federal government discontinued the Sehat Sahulat Programme for Newly Merged Districts from June 30, 2022, which is now funded by KP.

Federal Government’s Sehat Sahulat Programme catered to around one million families in newly merged districts (MDs) (excluding Khyber and Bajaur districts), he said adding that the integrated Sehat Card plus programme includes an annual premium cost of Rs. 3,000 per family and covers 1.5 million families, including Khyber and Bajaur districts.

The estimated cost of integrated Sehat Card Plus for NMDs is Rs. 4.5 billion, the minister said and added that federal government reneged on commitment to transfer PSDP funding of Rs. 5 billion to Khyber Pakhtunkhwa and indicated that the province should foot the bill for integrating an additional 1.5 million families into its Sehat Card Plus programme

Development grant initially reduced from Rs. 54 billion to Rs. 50 billion, then revised to Rs. 55 billion after provincial government’s agitation.

Only Rs5 billion has been released so far in the current fiscal year.

Khyber Pakhtunkhwa has consistently received less than its due share of federal tax assignment and 1% war on terror, as per the 7th NFC award Rs 25.35 billion  against Rs 26.37 billion and actual transfer on account tax assignment Rs 211.03 billion against share of Rs 219.40 billion.

Under 7th NFC award allocated 14.62% share of provincial divisible pool to Khyber Pakhtunkhwa as well as 1% grant due to war on terror.

The shortfall against due share of total Federal Board of Revenue (FBR) collections amounts to Rs. 22.43 billion and no amount on account of net hydel profit payment was disbursed to the province since the present coalition government during eight months at the federal level.

He said that non-payment of NHP to Khyber Pakhtunkhwa has been creating fiscal problems for the province as its arrears has increased to Rs 61.216 billion with indexation arrears Rs 21.6 billion, arrears of fiscal year Rs 11.902 billion and regular NHP for July-November 2022 Rs 12.218 billion  besides Rs 16.638 billion for the remaining period of December-June 2023.

On top of that, the FBR revenue collection is growing at 15% to 16% in the current fiscal year against 30% last year will reduce the provincial share of federal tax revenues by over Rs 65 billion.

He said that the Khyber Pakhtunkhwa government has increased its revenue by 122 percent during the last three years by introducing reforms and removing redundancies or

duplication in 20 taxation as well as 8 non-taxation sub heads.

The provincial finance minister further said that the burden of pension in KP is continuously increasing.

The pension bill of Khyber Pakhtunkhwa will increase to 300 billion by the year 2027.

It was Rs1 billion in 2003-04 which has now increased to Rs 108 billion rupees, he added.

He said that the KP government has introduced new pension reforms to facilitate the five thousand employees.

In the new system of pension, the government will contribute 10% and the employee will contribute 12.1% and we are hoping that changes in pension rules will save 1Rs billion annually.

The KP finance minister said that the pension bill of the federation and the provinces has been increasing by 25 percent annually and  the pension bill of the entire country will increase from Rs 1200 billion to Rs 3000 billion by 2027.

He also said that the KP government has increased the early retirement age from 45 to 55 years and we are expecting that the KP government will also save Rs 12 billion annually.

Taimur Jhagra further said that I had not written a letter to the IMF on the issue of surplus budget but I wrote a letter to the federal government.

I have no regrets and I stand by my position on the matter of the letter, he added.

While replying to the question, He also said that Federal Finance minister Ishaq Dar is not giving meeting time for the last few weeks to discuss the financial issues facing the province.


Shahzad Paracha
Shahzad Paracha
The writer is a member of Pakistan Today's Islamabad bureau. He can be reached at [email protected]


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