KP finance advisor accuses federal govt of reducing provincial funds while increasing its own spending

Muzzammil Aslam, Advisor to the KP Chief Minister on Finance, sharply criticised the federal government for reducing provincial funds while failing to address its own financial mismanagement. He also questioned the central government’s handling of debt, subsidies, and the impact of its policies on provincial economies.

In a press briefing held on Wednesday at the Khyber Pakhtunkhwa (KP) House in Islamabad, Aslam highlighted the ongoing discussions regarding the 27th Constitutional Amendment and the upcoming National Finance Commission (NFC) meeting. He pointed out that while the federal government talks about convening the NFC meeting, it is simultaneously pushing for changes that would reduce provincial financial shares. 

Aslam added that the federal government’s claim of giving provinces 41.5% under the NFC was misleading, as non-tax revenue, which constitutes a significant part of federal income, is not shared with the provinces.

The advisor further criticised the federal government’s spending priorities. He revealed that the government’s expenditure for the year includes Rs. 8,207 billion allocated to interest payments, despite a reduction in the interest rate from 22% to 11%. 

He also pointed out that the federal government’s pension bill for this year stands at Rs. 1,055 billion, and that Rs. 1,186 billion is being spent on subsidies, with Rs. 975 billion allocated to administrative expenses.

Aslam raised concerns about the government’s borrowing practices, stating that the federal government has borrowed Rs35 trillion in the last four years, of which Rs4 trillion was not spent on development projects. He warned that such borrowing to service interest payments would not lead to economic improvement.

The advisor also criticized the government’s decision to return 45 LNG ships, describing it as a move that would lead to further losses for Pakistan. He questioned why the federal government’s poor decisions should result in a financial burden on the provinces and the public.

Discussing Khyber Pakhtunkhwa’s financial situation, Aslam noted that the province has managed to save Rs. 300 billion over the past 18 months, reducing its debt burden by 40%. However, he highlighted the national debt, which stands at Rs. 78 trillion, with arrears pushing the total to Rs. 94 trillion.

Aslam also pointed to the country’s struggling foreign direct investment (FDI), revealing that while FDI amounted to $447 million in the last three months, $751 million in brackly newss were repatriated abroad, signaling a net outflow of capital.

The advisor ended his remarks by questioning the government’s claims that the IMF staff-level agreement shows positive progress, citing the lack of action or announcement following four weeks of silence on the matter. He also noted that while the State Bank reports low inflation, the prices of essential goods have increased by as much as 40%, creating further economic strain for the public.