Peshawar: he Khyber Pakhtunkhwa (KP) government has presented a Rs2.17 trillion budget for FY2026-27, striking a balance between fiscal discipline, economic growth, social welfare and tax relief. Branded as the “Khushhal Khyber Pakhtunkhwa Budget“, the provincial government’s financial plan projects a deficit of Rs48 billion while significantly increasing development spending and strengthening provincial revenue generation.
The budget allocates Rs524 billion for the Annual Development Programme (ADP), one of the largest development portfolios in the province’s history, while current expenditures are estimated at approximately Rs1.65 trillion. The government plans to finance the deficit through its own resources rather than additional borrowing.
A key feature of the budget is the province’s growing emphasis on self-reliance. Provincial own-source revenues have been projected at Rs182.4 billion, representing a substantial increase from the previous year’s estimates. Tax revenues are expected to reach Rs115.9 billion, while non-tax revenues are projected at Rs66.5 billion. The increase reflects the government’s efforts to improve tax administration, enhance compliance and broaden the tax base without imposing new taxes on citizens.
Sales tax on services remains the backbone of provincial tax collection, accounting for nearly half of total tax revenues. To further strengthen revenue mobilisation, the KP Revenue Authority is introducing reforms centred on digitalisation, enforcement, taxpayer facilitation and data integration. A notable initiative is the proposed Public Participation and Whistleblower Incentive Framework, under which citizens will be rewarded for reporting tax evasion, fake invoicing and other fraudulent practices.
Despite ambitious revenue targets, the government has announced significant tax relief measures. Chief Minister Sohail Afridi stated that no new taxes would be introduced during FY2026-27. In a move aimed at promoting investment and reducing business costs, the Infrastructure Development Cess has been proposed to be reduced from 2 percent to 0.75 percent. The government believes the measure will improve the business environment and support trade and industrial activity, particularly in the wake of disruptions caused by border closures and reduced trade with Afghanistan.
The budget also includes targeted relief for households and the tourism sector. Residential properties up to five marlas have been exempted from property tax, benefiting an estimated 200,000 households across the province. The hotel bed tax has been reduced from 7 percent to 5 percent to encourage tourism and hospitality-related investment. Furthermore, tax exemptions for the merged districts and Malakand Division have been retained to support economic development in these areas.
On the social welfare front, the government has significantly expanded public spending programmes. The allocation for Sehat Card Plus has been increased from Rs40 billion to Rs50 billion, reaffirming the province’s commitment to universal healthcare coverage. Additional initiatives include student loan schemes, financing facilities for overseas Pakistanis and the introduction of free public Wi-Fi services in Peshawar to enhance digital connectivity and inclusion.
The budget also provides relief to government employees and workers. Salaries and pensions have been increased by 7 percent, while the minimum monthly wage has been proposed at Rs45,000, reflecting the government’s efforts to cushion the impact of inflation on lower-income groups.
Finance Adviser Muzzammil Aslam highlighted improvements in fiscal management, noting that provincial own-source revenues had increased substantially during the outgoing fiscal year. He attributed the growth to stronger revenue collection, digitalisation initiatives and improved financial governance. According to the government, savings generated through the Debt Management Fund and the consolidation of departmental funds into the provincial treasury have further strengthened the province’s fiscal position.
The government has also renewed its demand for the early finalisation of the 11th National Finance Commission (NFC) Award. Chief Minister Afridi expressed concern that continued delays are adversely affecting resource allocation for the merged districts and urged the federal government to complete the process within the timeframe previously indicated by Prime Minister Shehbaz Sharif.
Overall, the FY2026-27 budget reflects the KP government’s strategy of combining fiscal consolidation with social protection, infrastructure development and private-sector support. By pursuing higher revenue collection while avoiding new taxes, expanding healthcare spending and maintaining development momentum, the province aims to accelerate economic growth and improve public service delivery during the coming fiscal year.
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