Khyber Pakhtunkhwa faces federal funding shortfall amid political divide

Khyber Pakhtunkhwa remains the only province in Pakistan governed by the opposition Pakistan Tehreek-e-Insaf (PTI) while all other provincial governments are allied with the ruling coalition in Islamabad.

This political divide has strained relations between the federal and KP governments, complicating economic stability and development efforts.

A key challenge is funding. The KP government claims that the federal government owes it more than PKR 2 trillion, impacting crucial projects in health, education and infrastructure. While other provinces have reported improved fund releases, KP officials argue that they are still facing delays.

The province has a unique financial structure. Despite holding 45% of Pakistan’s forests, having the potential to generate 30,000 megawatts of electricity and producing 80% of the country’s tobacco, KP relies on federal funds for 70% of its budget. This dependency has made the strained relationship with Islamabad even more critical.

KP has been at the forefront of social welfare initiatives, notably launching Pakistan’s first universal health insurance program. The "Sehat Card" provides every resident family with health coverage of up to PKR 1 million.

However, due to financial constraints, the program was temporarily suspended last year before being reinstated. To ensure its sustainability, the provincial government is now considering setting up its own insurance company.

Meanwhile, the province is also responsible for the Accelerated Implementation Program (AIP), aimed at developing the newly merged tribal districts. These projects require timely funding, which KP leaders argue has been lacking.

The province made headlines last year when it presented its budget for fiscal year 2024-25 ahead of the federal government—a first in Pakistan’s history. The PKR 1.75 trillion budget was the largest in KP’s history and was drafted under the financial model of Muzzammil Aslam, an economist and financial analyst who was appointed after former finance minister Taimur Saleem Jhagra’s exit.

Aslam, originally from Karachi, holds an MSc in economics from the University of Bath and a master’s in public administration from Karachi University.

He has extensive experience in the automobile, real estate and stock exchange sectors and joined PTI in 2021. He previously served as an adviser to former Prime Minister Imran Khan and as a spokesperson for the finance ministry.