KP unveils PKR 2.17 trillion tax-free budget with 7% pay raise and development push

Pakistan's Khyber Pakhtunkhwa province unveiled a PKR 2.17 trillion tax-free budget for fiscal year 2026-27 in Peshawar on Friday. Chief Minister Sohail Afridi presented the "Khushal Khyber Pakhtunkhwa Budget" in the provincial assembly, proposing a 7% raise in salaries and pensions and a PKR 48 billion fiscal deficit. The plan prioritizes development spending and public welfare with no new taxes introduced.

What does the KP budget 2026-27 include?

The KP budget 2026-27 allocates PKR 524 billion for development and PKR 1.645 trillion for current expenditures. It proposes a 7% increase in salaries and pensions for government employees, raises the minimum monthly wage by PKR 5,000 to PKR 45,000, and introduces no new taxes across the province. The provincial government projects a fiscal deficit of PKR 48 billion.

How much has KP allocated for health and education?

Health and education received the two largest sectoral allocations in the budget. Education accounts for PKR 468 billion and health for PKR 334 billion. Within the health allocation, PKR 80 billion has been earmarked for Medical Teaching Institution hospitals and PKR 50 billion for the Sehat Card health insurance program.

The budget also includes PKR 15 billion for the Ehsaas social welfare initiative and PKR 51 million for the economic empowerment of minority communities. A separate allocation has been set aside for the provincial government's good-governance roadmap. PKR 29 billion has been directed to Zakat and social assistance programs.

What are the major development projects in the KP budget?

The budget's development program covers several large infrastructure and public service schemes. Key projects include PKR 36 billion for the Peshawar Rehabilitation Program, PKR 7.5 billion for the Peshawar Bus Rapid Transit system, and PKR 4 billion for the Khushhal Hazara Program. PKR 35 billion has been allocated separately for the province's merged tribal districts.

Other development measures include PKR 2 billion in interest-free loans for overseas employment seekers, PKR 2.5 billion for electric bikes and rickshaws, and PKR 2 billion for the Ehsaas Kisan agricultural support program. Local governments will receive PKR 90 billion under the budget. Allocations for agriculture, energy, and transport stand at PKR 29 billion, PKR 42 billion, and PKR 14 billion respectively.

How will KP finance its 2026-27 budget?

Khyber Pakhtunkhwa expects to receive PKR 1.24 trillion from federal tax revenues, the largest single source of provincial financing. Additional inflows include PKR 149 billion from the province's one-percent share of the divisible pool linked to the war on terror, and PKR 38 billion in net hydel profits. Provincial revenues are projected at PKR 182 billion.

The government also tabled a supplementary budget of PKR 121 billion for the outgoing fiscal year 2025-26 alongside the annual proposals. Chief Minister Afridi confirmed the province does not plan to take on any new borrowing under the proposed budget. He also stated the provincial government would not present any grant-related proposal to the federal government until a meeting is arranged with jailed PTI founder and former prime minister Imran Khan.