Fiscal, debt management: KP govt to introduce series of reforms

PESHAWAR: The government of Khyber Pakhtunkhwa has approved the Khyber Pakhtunkhwa Fiscal Responsibility & Debt Management (Amendment) Bill, 2026, introducing a series of fiscal and debt management reforms aimed at strengthening financial discipline, refining borrowing limits, and improving institutional oversight of public debt.

The approval was granted during 51st meeting of the Khyber Pakhtunkhwa cabinet held here with Chief Minister Muhammad Sohail Afridi in the chair. Besides, members of the provincial cabinet and administrative secretaries of all departments attended the meeting.

Under the proposed amendments to promote prudent and well-planned borrowing for productive development while reducing reliance on excessive debt through enhanced fiscal management mechanisms.

The reforms also provide for the establishment of a dedicated Debt Management Office to strengthen institutional arrangements.

Under the amended fiscal limitation provisions of Section 9(b), the government shall ensure that net investment in non-financial assets in any financial year is not less than 20 percent of the Province’s average revenue. In cases where such investment falls below the prescribed threshold, prior approval of the government will be mandatory.

The amendments also revise debt limitation provisions under Section 10. According to the revised framework, debt servicing in any financial year shall not exceed five percent of the province’s average revenue. However, with prior government approval, debt servicing may exceed the limit up to a maximum of seven percent of the average provincial revenue.

Similarly, the combined stock of total public debt and guarantees shall not exceed 75 percent of the Province’s average revenue at any given time, he said. In exceptional circumstances, the government may approve an increase beyond this threshold, provided that the combined stock does not exceed 100 percent of the province’s average revenue.

The amendment bill further stipulates that autonomous and semi-autonomous bodies shall not be authorized to raise loans, incur debt, or issue guarantees without prior approval of the provincial government.

The amendments are intended to enhance fiscal sustainability, improve debt transparency, and ensure that public borrowing remains aligned with the province’s development priorities and long-term macroeconomic stability.

The cabinet has also approved the Budget Strategy Paper (BSP) 2026-27, outlining the provincial government’s fiscal priorities and development roadmap for the next financial year.

The strategy focuses on strengthening tax and non-tax revenues, reducing reliance on borrowing, improving returns on public investment and promoting youth empowerment and environmental protection.

Copyright Business Recorder, 2026