• Proposes interim discretionary grants until consensus is reached
• Muzzammil says current NFC orders exclude merged districts from equitable distribution
• Terms continued denial ‘narrow provincialism’
PESHAWAR: The Khyber Pakhtunkhwa government has requested the federal government to revise the National Finance Commission (NFC) resource distribution formula and, if needed, to institute discretionary grants for all provinces pending the emergence of a consensus on formula updates.
The move followed KP’s walkout from the net hydel profit (NHP) subgroup on merged areas on Thursday after the other three provinces refused to include the region’s population in the new resource distribution formula, which could have increased KP’s share from the existing 14.62 per cent to 18.96pc.
An official, requesting anonymity, told media that if the NFC failed to address the issue, KP could take the matter to court.
KP Minister for Finance Muzzammil Aslam told Dawn that eight annual modifications of the 7th NFC under Article 160(6) had repeatedly been raised as being in violation of the Constitution.
He said that due to other stakeholders denying the legal necessity to update the formula and include the merged districts’ share, KP had walked out of the process to highlight the need for corrective action and its incorporation in the annual order of the 7th NFC modifications.
“While KP remains committed to the letter and spirit of Article 160 of the Constitution, namely the NFC provisions, it does not want to remain a party to an unconditional formula detrimental to the region of Pakistan that anchors its national security, which is a declared national priority by consensus achieved in 2018,” he said.
He added that, in the interim, as the annual modification of the 7th NFC was no longer a consensus formula and provincial shares were being unlawfully disbursed without a valid constitutional basis, KP was requesting the Centre to implement a revised formula or institute discretionary grants until consensus was reached.
“We are proposing this mechanism to ensure that the state is not impeded in any way in the running of essential services and that the federal government is able to meet its current challenges and obligations unhindered, with designated resources to stabilise the western border,” Mr Aslam said.
“Our focus remains to work in a non-partisan and non-parochial fashion to ensure that the national goal decided by the provinces and the federal government with the passing of the 25th Constitutional Amendment is carried out in principle and practice so that both development and security prosper in the country,” he added.
He said KP’s walkout from subgroup VII of the 11th NFC, tasked with making recommendations on the merger of former Fata (newly merged districts) and their share in the divisible pool, was necessitated as provinces were effectively denying “minuted agreements” and constitutional principles by delaying recognition of the merged districts’ share effective since the 25th Constitutional Amendment.
“This continued denial amounts to narrow provincialism,” Mr Aslam said.
He added that KP could no longer recognise a situation where the merged districts’ share continued to flow as non-shares to more developed regions due to the stagnation of the NFC process, terming such disbursements unlawful.
“Funds to the tune of Rs964 billion that a timely and constitutional automatic update of the NFC formula would have directed towards development, stabilisation and security of the merged districts have been spent elsewhere, vitiating the national priority of bringing these areas on a par with the rest of Pakistan,” he said.
Mr Aslam said that given the security challenges across the western border, KP did not consider the situation tenable as it continued to advocate nation-building and strengthening of the federation.
He said KP remained committed to the NFC process and its constitutional provisions and had consistently invoked legal mechanisms to update the annual extension of the 7th NFC since June 2018 to prevent it from becoming ultra vires of the Constitution.
He added that the last eight annual orders under Article 160(6) covered only “three and a half provinces” to the exclusion of the most restive region of Pakistan — the merged districts on the western border — thereby violating the constitutional principle of equitable resource distribution.
Mr Aslam said KP’s focus remained on working in a non-partisan and non-parochial manner to ensure that the national goals agreed upon under the 25th Constitutional Amendment were implemented in both principle and practice.
He said KP believed in federalism and the NFC process as essential for development, harmony and security in Pakistan, but maintained that progress was not possible unless the issue of constitutionally recognised population and territorial realities was addressed meaningfully.
He added that the KP government had proposed that the Centre immediately convene an NFC meeting with the agenda of updating the formula, removing unconstitutional elements from annual orders under Article 160(6) and bringing them in line with the Constitution.
Published in media, March 28th, 2026
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