Centre rejects KP claim for displacement costs – Pakistan
• Province says Rs10.4bn expense linked to settlement of displaced persons from Bajaur, Tirah Valley
• Federal govt also rules out higher net hydel profit payments to province
ISLAMABAD: The federal government has declined Khyber Pakhtunkhwa’s request for Rs10.4 billion in additional expenditure linked to the settlement of displaced persons from Bajaur and the Tirah Valley following security operations, asking the provincial administration to meet these expenses from its own resources.
The Centre also expressed its inability to increase provincial transfers on account of net hydel profit beyond Rs3bn per month currently being given to the province due to fiscal limitations and legal precincts. The Centre, however, indicated to disburse about Rs26bn on an urgent basis on account of the Accelerated Implementation Programme (AIP) for the development of KP’s newly merged districts, previously called Federally Administered Tribal Areas (Fata).
This followed a series of meetings between the federal and provincial leadership over the last two days, beginning with a session led by Prime Minister Shehbaz Sharif and KP Chief Minister Sohail Afridi on Monday. The provincial government made a pitch for recovery of a total of Rs426bn “outstanding federal liabilities payable to KP”.
Finance Minister Muhammad Aurangzeb and Planning Minister Ahsan Iqbal then sat down with KP’s team, led by KP Finance Minister Muzzammil Aslam, on Tuesday to follow up on those demands.
Informed sources said the province also demanded an early requisition of the second meeting of the National Finance Commission (NFC).
Mr Aurangzeb reportedly asked Mr Muzzammil to complete the recommendations of a working group he headed on the question of requirements of merged districts and promised to call an NFC meeting soon.
The provincial government argued that Fata’s merger with KP in May 2018 increased the provincial population from around 31 million to 37m, with the area expanding from 74,521 square kilometres to 101,741. It argued that this should have automatically and proportionately increased KP’s share in NFC to 19pc from the existing 14.6pc. However, this gap of around 4.5pc created a
colossal burden. It said this year’s budget estimate for current expenditures of merged districts stood at Rs143bn, but the Centre had allocated only Rs80bn, even less than last year’s Rs105bn. For AIP 2025-26, the government had made a Rs100bn commitment but disbursed only Rs37bn in seven months.
Separately, KP reported that about 2,000 displaced families were staying at Babakhel Camp in North Waziristan, while another 15,000 families from the area were receiving Rs20,000 per month, amounting to around Rs4.2bn a year.
The province said it spent Rs19bn in FY24 and FY25 and a further Rs10.4bn so far this year due to the Bajaur and Tirah operations, without federal support.
Of the Rs426bn claim, KP said the largest chunk of Rs194.5bn pertained to federal excise duty on crude oil under the 18th Constitutional Amendment, which it said had remained unimplemented since FY11. It said another Rs75bn pertained to a windfall levy on crude oil production and Rs64bn was linked to water supply from the Galiyat Development Authority to Murree since 1947.
‘Cooperative federalism’
A statement issued by the Ministry of Finance said the meeting between the financial teams of federal and provincial government focused on a range of fiscal and development matters, including the timely release of funds under key development heads for merged districts, outstanding requirements linked to rehabilitation and support for temporarily displaced persons, and the broader framework of provincial entitlements and allocations, including those related to the NFC.
The KP team highlighted the operational and development imperatives in the merged districts and underscored the importance of predictable and timely releases to sustain ongoing schemes and meet pressing needs on the ground.
They also drew attention to pending obligations in respect of displaced families and other related commitments that require streamlined coordination and resolution.
Mr Aurangzeb “reaffirmed the federal government’s commitment to cooperative federalism and constructive engagement with the provinces”, the statement said.
He assured KP of his support in pursuing and facilitating their rightful claims for allocations under the NFC and other relevant heads discussed during the meeting, in accordance with applicable rules, agreed frameworks and due process.
The minister also emphasised that “effective coordination and timely reconciliation of accounts, where required, remain essential for smooth and transparent releases, and emphasised that the federal government remains mindful of the unique development and security-related challenges faced by KP, particularly in the merged districts”.
The meeting also reviewed ongoing work and consultations on NFC-related matters, including the need to sustain momentum on technical discussions and subgroup engagements to advance consensus on key issues and agreed to continue close coordination through relevant forums and technical channels to address outstanding matters on priority and to ensure that fiscal arrangements and releases support development objectives and service delivery.
Published in Dawn, February 4th, 2026
