KP Faces Rs300 Billion Shortfall in Federal Funds Amidst Economic Crisis

Khyber Pakhtunkhwa province faces a Rs300 billion shortfall in federal funds for the current fiscal year, including a Rs200 billion deficit in federal receipts and a Rs100 billion hit in funds for merged tribal districts. The province's adviser on finance, Muzammil Aslam, expressed concerns over the significant gap in funds.

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KP Faces Rs300 Billion Shortfall in Federal Funds Amidst Economic Crisis

KP Faces Rs300 Billion Shortfall in Federal Funds Amidst Economic Crisis

Khyber Pakhtunkhwa province is grappling with a significant financial crisis as it faces a shortfall of Rs300 billion in federal funds for the current fiscal year, according to Muzammil Aslam, Adviser to the Chief Minister on Finance. The massive gap includes a Rs200 billion deficit in federal receipts and a Rs100 billion hit in funds allocated for the recently merged tribal districts.

Why this matters: This shortfall has significant implications for the province's ability to provide essential services and infrastructure to its citizens, particularly in the merged tribal districts. If left unaddressed, it could exacerbate the economic crisis and undermine the region's stability.

Under the current budget, KP is supposed to receive Rs765 billion in federal tax receipts. However, the central government is likely to provide only Rs750 billion, resulting in a Rs15 billion shortfall. Additionally, the province faces a shortage of Rs2 billion under the one percent share of the federal divisible pool earmarked for the war on terrorism. KP is also unlikely to receive over Rs91 billion in windfall levy.

The financial situation in the merged tribal districts is particularly dire. The salary expenditure alone has increased from Rs60 billion at the time of the region's merger with KP in 2018 to Rs96 billion currently. However, the federal government has allocated only Rs66 billion for this purpose. The total expenditures of the merged areas are estimated at Rs116 billion for the current fiscal year.

In the previous fiscal year, the federal government released Rs60 billion for the tribal districts, despite the actual expenses standing at Rs73 billion. The provincial government had to bear the additional cost. Furthermore, only Rs41 billion was released for the Accelerated Implementation Programme for tribal districts, against the allocated Rs67 billion.

Muzammil Aslam expressed his concerns, stating, "We [KP] are likely to face an over Rs200 billion gap in federal receipts and a Rs100 billion hit in the funds for merged tribal districts." Despite the financial constraints, he emphasized that the province has given a surplus of over Rs96 billion to meet the targets under the International Monetary Fund's agreement, without wanting to embarrass the federal government.

The adviser acknowledged the Federal Board of Revenue's efforts in tax collection but highlighted that the provincial government has not compromised on its social welfare commitments, spending Rs10 billion under the head of welfare. As Khyber Pakhtunkhwa navigates this financial crisis, it remains to be seen how the federal government will address the significant shortfall in funds and support the province in meeting its budgetary requirements, especially for the merged tribal districts.

Key Takeaways

  • Khyber Pakhtunkhwa faces Rs300 billion shortfall in federal funds for current fiscal year.
  • Rs200 billion deficit in federal receipts and Rs100 billion hit in merged tribal districts' funds.
  • Shortfall threatens essential services and infrastructure in merged tribal districts.
  • Province has given surplus of Rs96 billion to meet IMF targets without compromising on social welfare.
  • Federal government's support crucial to address significant shortfall in funds for KP.