Key Takeaways
- World Bank proposes USD200 million in financing to boost Khyber Pakhtunkhwa’s tax base.
- Programme aims to increase own-source tax revenue from Rs64 billion to Rs122 billion by June 2031.
- Total cost of USD650 million includes USD450 million in provincial government financing.
The World Bank has proposed USD200 million in financing to help Khyber Pakhtunkhwa (KP) broaden its tax base and improve public service delivery, targeting an increase in the province’s own-source tax revenue from Rs64 billion to Rs122 billion in real terms by June 2031.
According to the bank’s document, the proposed Pakistan Public Resources for Inclusive Development Multiphase Programmatic Approach for KP envisages a total cost of USD650 million, with USD450 million in provincial government financing and USD200 million from the World Bank.
The programme is expected to run from fiscal year 2027 to fiscal year 2032, with the World Bank financing comprising a USD100 million International Development Association (IDA) credit and a USD100 million IDA loan.
The provincial government will contribute the remaining USD450 million, aiming to support macroeconomic stability and improve public service delivery through reforms targeting revenue mobilisation, expenditure efficiency in health and education, and the use of reliable data in policymaking.
The bank’s assessment highlights KP’s persistent fiscal and social challenges, noting that in fiscal year 2025, 35.3 percent of KP’s population lived below the national poverty line, around 40 percent of children under five were stunted, 36 percent of school-age children were out of school, and only 58 percent of children were fully immunised.
KP remains heavily dependent on federal transfers, while its own-source revenue finances only a small and declining share of rapidly rising expenditure. Higher salaries and pensions, the absorption of the merged districts, inflation, and an expanded development programme have increased spending pressures and crowded out public investment.
The proposed programme will focus on three major areas: expanding provincial revenue collection, improving the allocation and efficiency of health and education spending, and strengthening the provincial statistical system.
Under the revenue mobilisation component, the World Bank seeks a broader tax base, simplified and harmonised tax administration, and digital transformation across the KP Revenue Authority, Excise Taxation and Narcotics Control Department, and Board of Revenue.
The bank has identified gaps in tax coverage, fragmented revenue administration, and inadequate digital capacity as major obstacles to increasing provincial revenue. Property, agriculture, and substantial parts of the services sector remain outside effective taxation, while the three provincial agencies operate with overlapping mandates and limited data sharing.
