Khyber Pakhtunkhwa rejects Rs6.4 billion federal fund deduction

The Khyber Pakhtunkhwa (KP) government has rejected a proposal from the federal government to deduct Rs6.4 billion from its financial transfers. The federal Ministry of Finance reportedly informed the Accountant General of Pakistan Revenues in Peshawar of an intention to make this at-source deduction for July 2026.

Chief Minister Sohail Afridi stated that the provincial government has not approved or signed any memorandum of understanding regarding this additional amount, nor was any provision made for it in the 2026-27 provincial budget. The KP Finance Department argued that under Article 164 of the Constitution, the federal government cannot unilaterally deduct funds constitutionally payable to a province without express consent or statutory basis.

Disputes also involve conditions regarding the share for merged districts under the 11th National Finance Commission (NFC). While the federal government previously indicated that provinces provided grants for defense and regional conflict buffers, the KP administration maintains that the proposed Rs6.4 billion deduction lacks constitutional authorization.