The Federal Government has provided more than Rs799.35 billion to the Government of Khyber Pakhtunkhwa over the past 17 financial years to compensate the province for the economic, infrastructure and other financial losses arising from terrorism, according to official financial records.
The transfers have been made under the 7th National Finance Commission (NFC) Award, which provides Khyber Pakhtunkhwa an additional one percent share from the divisible pool of federal taxes in recognition of the extraordinary burden borne by the province due to terrorism.
The 7th NFC Award was agreed in December 2009 and became effective from July 1, 2010. Since then, the one-percent share has been incorporated annually into the provincial financial system. According to official records, Khyber Pakhtunkhwa received Rs799.359 billion under the mechanism from FY2010-11 through September 2026.
The year-wise record shows a marked increase in the funds transferred to the province over time:
| Financial Year | Estimated Amount | Amount Received |
|---|---|---|
| 2010-11 | Rs15.23bn | Rs14.56bn |
| 2011-12 | Rs18.02bn | Rs16.41bn |
| 2012-13 | Rs22.07bn | Rs19.005bn |
| 2013-14 | Rs23.82bn | Rs21.63bn |
| 2014-15 | Rs27.29bn | Rs24.42bn |
| 2015-16 | Rs30.15bn | Rs30.41bn |
| 2016-17 | Rs35.29bn | Rs31.29bn |
| 2017-18 | Rs39.17bn | Rs36.40bn |
| 2018-19 | Rs43.31bn | Rs39.40bn |
| 2019-20 | Rs54.46bn | Rs40.25bn |
| 2020-21 | Rs48.64bn | Rs44.85bn |
| 2021-22 | Rs57.20bn | Rs59.91bn |
| 2022-23 | Rs68.59bn | Rs70.47bn |
| 2023-24 | Rs89.81bn | Rs86.71bn |
| 2024-25 | Rs108.443bn | Rs112.296bn |
| 2025-26 | Rs137.912bn | Rs128.234bn |
| 2026-27 | Rs149.0076bn | Rs23.0069bn |
FY2026-27 figures reflect the position through September 2026, based on the information provided.
The figures demonstrate the substantial growth in annual transfers. While the province received Rs14.56 billion in FY2010-11, the amount rose to more than Rs112 billion in FY2024-25 and approximately Rs128.23 billion in FY2025-26.
For the ongoing FY2026-27, the provincial government has estimated receipts of approximately Rs149 billion under the mechanism. By September 2026, around Rs23.69 billion, according to the provided record, had already been released.
Despite the scale of these transfers, the provincial financial records do not contain a separate expenditure head specifically identifying the utilisation of the one-percent terrorism-compensation allocation.
The reason is rooted in the structure of the NFC mechanism. The amount received by Khyber Pakhtunkhwa is deposited into Account-I, the Provincial Consolidated Fund, along with other provincial revenues. There is no separate account or dedicated expenditure head through which the subsequent use of these receipts can be independently tracked.
As a result, the available provincial financial records do not provide a clear, standalone picture of where the Rs799.35 billion was ultimately spent, or how much was directed toward specific sectors, projects or activities associated with the consequences of terrorism.
This distinction is important: the absence of a separate expenditure head does not mean the funds were not incorporated into the provincial budget. Rather, once received, the funds become part of the province’s broader consolidated financial resources, making their individual utilisation difficult to identify retrospectively.
Khyber Pakhtunkhwa Finance Secretary Kamran Afridi explained that the funds should not be interpreted as a dedicated operational fund for fighting terrorism. According to the Finance Secretary, the one-percent allocation is provided under the NFC framework to compensate the province for losses suffered as a result of terrorism. He also noted that the mechanism is not exclusive to Khyber Pakhtunkhwa, as the NFC framework provides corresponding fiscal transfers to other provinces as well.
The amount ultimately received is linked to the revenue collection of the Federal Board of Revenue (FBR). According to the Finance Secretary, the achievement of FBR’s revenue targets directly affects the amount available for distribution. Consequently, the provincial government also bases its budgetary planning on the anticipated federal revenue transfers and the corresponding amount expected under the NFC arrangement.
Khyber Pakhtunkhwa has experienced prolonged security challenges that have affected infrastructure, trade, economic activity, public services and law-enforcement institutions. The one-percent provision under the 7th NFC Award was introduced specifically against this backdrop, recognizing the additional financial burden faced by the province because of terrorism and providing an additional share of federal tax revenues.
Over the years, the steadily increasing transfers have therefore constituted a significant component of the province’s overall fiscal resources. However, because the funds are incorporated into the Provincial Consolidated Fund, the financial system does not allow the amount to be treated as a standalone pool whose expenditure can be traced separately from other provincial revenues.
Alongside the NFC transfers, the Khyber Pakhtunkhwa government has continued to increase funding for the provincial police amid ongoing security requirements. According to Chief Minister’s Adviser on Finance Muzzammil Aslam, approximately 10 percent of the province’s overall budget is allocated to the police. For the current FY2026-27, the police budget has been increased to Rs191.40 billion.
The increase extends beyond the overall allocation. The police’s operational budget has been doubled from Rs15 billion to Rs30.20 billion, providing additional financial resources for operational requirements and security-related activities.
The provincial government has also expanded the sanctioned strength of the police force. Following the creation of additional positions, the total number of approved police posts has risen to 139,318.
The financial data provides a clear picture of the changing scale of the fiscal mechanism introduced under the 7th NFC Award. From Rs14.56 billion received in the first year of implementation, annual receipts have grown substantially, crossing the Rs100-billion mark in recent years. The cumulative amount now stands at Rs799.35 billion, according to the official figures provided. At the same time, the absence of a dedicated accounting head means that the specific project-by-project or sector-by-sector utilisation of these funds cannot be established from the consolidated provincial accounts alone.
The issue therefore involves two distinct aspects: the substantial financial support transferred to Khyber Pakhtunkhwa under the NFC’s one-percent provision, and the accounting structure under which those resources become part of the province’s overall consolidated fund rather than remaining separately identifiable.
The transfers under the 7th NFC Award represent a long-term fiscal arrangement designed to recognize the exceptional economic and financial pressures faced by Khyber Pakhtunkhwa because of terrorism. With the province continuing to confront security challenges, the government has simultaneously increased allocations for policing and operational requirements. The Rs191.40 billion police budget, Rs30.20 billion operational allocation and 139,318 sanctioned police positions reflect the scale of resources being committed to the province’s law-enforcement apparatus.
The cumulative Rs799.35 billion transferred since FY2010-11, together with continued increases in police funding, highlights the significant financial dimension of the security challenges confronting Khyber Pakhtunkhwa and the fiscal mechanisms established to support the province.
