KP rejects ‘unconstitutional NFC process,’ demands fair share for merged districts: KP FinMin

• Muzzammil Aslam calls procedural delays ‘unconstitutional and inequitable,’ demands rightful fiscal share for Merged Areas

• Claims Rs964b dues of former FATA diverted over eight years, saying 25th Amend changed population and area, but NFC formula never updated

• Says KP provided technical data, fiscal modeling; received no meaningful feedback, defending walkout from meeting as a principled stand, not linked to political demands

• Proposes interim grants to ensure continuity until updated formula is implemented, calling for urgent NFC reforms

 PESHAWAR: Khyber Pakhtunkhwa Finance Minister Muzzammil Aslam on Thursday clarified the provincial government’s decision to walk out of the Subgroup-VII meeting of the 11th National Finance Commission (NFC), calling the move a necessary step to defend the constitutional and fiscal rights of the Merged Areas, according to an official statement.

In a statement, the KP finance minister said that the NFC preparatory meeting, convened to discuss overdue fiscal adjustments arising from the 25th Constitutional Amendment that merged former FATA into KP, has been widely covered in the media. However, KP officials said several aspects were misreported or misunderstood, prompting this detailed explanation of the government’s position, intent, and legal reasoning.

Speaking to reporters, Minister Aslam said the walkout was a measure of last resort after months of assurances, commitments, and procedural delays that have prevented Khyber Pakhtunkhwa from receiving its constitutionally mandated share of revenues. “This is not a political demand or a reaction to broader issues. Our participation in the NFC is based on principle, law, and national interest,” he said, stressing that the issue concerns both equity and the stabilization of Pakistan’s western border.

The minister highlighted that the NFC process and mechanisms are explicitly defined under Article 160 of the Constitution. NFC Awards are meant to last five years, after which a fresh analysis and new award are required to account for demographic and economic changes. “This constitutional wisdom ensures that fiscal federalism is responsive and dynamic, not static. It allows timely adjustments to meet the changing needs of the nation,” he explained.

He recalled that the 7th NFC Award completed its term in 2015. Instead of instituting a new award, the federal government issued a modification order under Article 160(6), extending the previous award without updating the formula shares in accordance with constitutional requirements. The 2018 merger of FATA into KP, legislated through the 25th Amendment, immediately altered the province’s population and area. These changes automatically impacted the variables used in the NFC formula and necessitated an update of provincial shares to reflect the new constitutional reality.

“Under Article 160(6), the President may amend or modify the law governing revenue distribution before a new NFC Award is issued. This mechanism has been applied before—for instance, when Balochistan’s share was amended in 2015. However, for KP post-FATA merger, no such update was implemented. Annual modification orders continued using outdated shares, ignoring the Merged Areas entirely,” Aslam said. He added that the failure to revise the formula has rendered all subsequent fiscal transfers constitutionally invalid and deprived the Merged Districts of their rightful share.

The minister emphasized that the Khyber Pakhtunkhwa Government has consistently raised this constitutional violation over the past eight years. Despite repeated notifications, meetings, and technical submissions, no meaningful progress was made. “Funds that should have gone to the Merged Areas, supporting both development and security on the western border, have been diverted to other provinces. This is inequitable, unconstitutional, and undermines national cohesion,” he said.

According to KP calculations, Rs964 billion—the share belonging to the Merged Districts—was misallocated over the years. Aslam noted that these funds were spent on development projects in other provinces, luxury transport, and non-priority items, instead of stabilizing the formerly conflict-affected regions. “The Merged Areas are home to over six million citizens, with a poverty incidence of 74 percent. Ignoring them is not merely a legal violation—it is a moral and national failure,” he said.

Minister Aslam also addressed misperceptions that updating the NFC formula would reduce the shares of other provinces. “This is factually incorrect. The constitutional amendment and demographic changes automatically recalculated KP’s share. The eight applications of the old modification order without updating the population and area of the Merged Districts created a fiscal injustice, which now requires correction,” he explained.

He outlined the sequence of events leading to the walkout. At the first meeting of the 11th NFC, KP formally raised the issue and proposed revised calculations for an updated formula. The federal government and other provinces agreed to constitute a subgroup to develop the updated formula and present it to the full NFC by mid-January 2026. KP provided technical analysis, fiscal impact modeling, and updated data treatment as requested, but received no meaningful feedback.

“Instead of addressing the overdue constitutional correction, the process became diversionary. When the Subgroup-VII meeting convened on 26th March, we were faced with a continued insistence on applying an unconstitutional formula that denied the Merged Areas their fiscal existence. After months of assurances and unmet commitments, the walkout became necessary,” Aslam said.

The minister stressed that KP’s stance is consistent with the principles of the NFC. “We remain fully committed to dialogue, consultation, and cooperation. Our objective is not to block funds or challenge federal authority, but to ensure the Constitution is respected, and the Merged Areas receive what they are due,” he added.

Aslam noted that interim measures can be implemented to ensure continuity of state functions while the updated formula is finalized. “If necessary, discretionary grants may be provided to all provinces until consensus is reached. This will allow essential development, security, and governance functions to continue uninterrupted,” he said, urging other provinces to rise above short-term considerations.

He cited precedent to reinforce KP’s position. “In 2015, Balochistan’s shares were updated under the 7th NFC Award after its expiry. This demonstrates that NFC formulas are not fixed—they can and must be updated to reflect constitutional and demographic changes. KP expects similar treatment post-FATA merger,” he said.

The minister also underscored the strategic importance of the Merged Areas. “Investing in the development and security of the western border has positive externalities for Pakistan’s economy and national security. The constitutional neglect of the Merged Districts weakens both,” he explained.

Concluding his statement, Aslam reiterated KP’s commitment to the NFC process and to national cohesion. “Our government seeks a stronger federation, where all provinces, including the Merged Areas, are treated equitably. The walkout was not an act of defiance but a principled stand to defend the Constitution and the rights of our citizens. We trust that the federal government and other provinces will recognize this responsibility and work toward a timely resolution,” he said.

The Khyber Pakhtunkhwa Government has consistently emphasized that participation in the NFC is a nation-building exercise, free from immediate political considerations, and that it remains committed to dialogue and consensus-building for the long-term benefit of Pakistan.