• Dwindling federal transfers hamper province’s plans
• Spending on health and education to see substantial increase

Islamabad: The Khyber Pakhtu­nkhwa government is set to unveil a total outlay of Rs2.1 trillion when it presents the budget for fiscal year 2025-26 today (Friday). This represents a substantial increase of 19 per cent over the outgoing year’s expenditure.

What makes this year’s provincial budget different is its four-year development vision, designed to improve KP’s long-standing infrastructure gaps and elevate social sector performance.

The document shows an ambitious financial plan, but the province faces mounting challenges, including Rs98bn in debt servicing and dwindling transfer of resources from the Centre. Despite these obstacles, the provincial government will maintain its target of Rs150bn surplus in FY26, a key portion of its IMF agreement with the federal government. The KP produced a Rs100bn surplus in FY25.

The province’s biggest test in FY26 will be the federal government’s willingness to partially provide pledged funds for the merged districts. Islamabad has disbursed only Rs138bn in seven years _ far short of a commitment of Rs700bn.

Long-pending net hydel profits (NHP) and royalty payments will also affect next year’s development spending and the province’s fiscal trajectory.

Official sources indicate that KP’s total budget outlay for FY26 is expected to reach........

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