PESHAWAR- Khyber Pakhtunkhwa government faces a potential 27 percent cut in the current fiscal year’s budget, citing reduced federal transfers, declining donor funding, and the obligation to present a surplus budget under International Monetary Fund conditions.
The provincial government had initially unveiled a Rs1,754bn revenue target for the 2024–25 budget. The budget was presented ahead of the federal budget.
Following the announcement of the federal budget, the province revised its revenue estimates upwards to Rs1,905bn. However, a new report prepared by the provincial Finance Department paints a bleaker picture.
The report indicates a major shortfall in expected federal transfers, including the net hydel profit, windfall levy, development funds for tribal districts, internally displaced persons (IDPs) assistance, and the three percent National Finance Commission share for merged districts.
The total shortfall in funding is estimated to reach Rs526bn by the end of the financial year. This massive deficit is expected to shrink the provincial budget to Rs1,396bn from the earlier projected Rs1,754bn.
In a bid to comply with IMF requirements to present a surplus budget, the province has slashed its projected expenditure from Rs1,654bn to Rs1,314bn.
The heaviest blow has landed on the development sector.
The Finance Department report confirms that the government had to cut 14 percent from the ongoing expenses, 27 percent from the development budget for settled districts, 31 percent from the current expenditures for merged districts, and 54 percent from the development budget of those same merged districts.
The substantial reduction in both federal and donor funding has pushed the province to adopt stringent austerity measures, severely limiting its ability to invest in public welfare and infrastructure development during the current financial cycle.
