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Results BriefsMarch 11, 2024

Improving Public Finances for Service Delivery in Pakistan’s Khyber Pakhtunkhwa Province

Taxpayers’ Registration Drive in Pakistan

Taxpayers’ Registration Drive – photo courtesy of KP Revenue Authority


Financed by the World Bank’s International Development Association (IDA), the Khyber Pakhtunkhwa Revenue Mobilization and Public Resource Management project aimed to mitigate fiscal challenges arising from the integration of the former tribal areas of Pakistan into the province. Launched in 2019, the project also supported the government of Khyber Pakhtunkhwa (KP) to generate the revenue needed to provide services to existing districts, as well as the newly merged districts, which were at the time characterized by low levels of human development, lack of access to basic public services, and high poverty rates. As a result of the project, the KP government’s collection of revenues generated and administered at the provincial level more than doubled, from $99.4 million in the 2019 fiscal year (FY19) to $216 million in FY22.


In 2018, Pakistan’s National Assembly enacted the 25th Amendment to the Constitution, merging the Federally Administered Tribal Areas (FATA) with the province of Khyber Pakhtunkhwa (KP). FATA at the time was characterized by a lack of a formal governance system, low levels of human capital and limited access to services and was of the poorest regions of Pakistan. FATA had tax-exempt status, meaning that the merger had the potential to significantly affect KP’s fiscal situation. The Khyber Pakhtunkhwa Tribal Decade Strategy (TDS) was developed to address the region’s unique and multifaceted challenges, and the related “Accelerated Implementation Plan” estimated the cost of supporting development and stability in the former tribal districts at $1.38 billion over three years (2018-2020). The plan had a funding gap of $726 million. While some of this gap was reduced by transfers from Pakistan’s federal government, KPRMP was instrumental in mobilizing resources to finance service delivery. 


Launched in 2019, KPRMP aimed to increase KP’s capacity for revenue collection and management of public finances to provide better services. The project supported improvements in the administration of taxes, including services sales tax, urban immoveable property tax, stamp duty, and motor vehicle tax. The project is also helping to create data linkages between three tax authorities of the province and with third party withholding agents to support tax intelligence. The project also worked to improve filing compliance and digital payments. It supported the update and digitalization of property tax records and linked them to geographic information system (GIS) maps to enable improved collection. The project included a technical assistance (TA) component to strengthen e-government. This was informed by global experience on the use of ICT to streamline and digitize selected business processes of different government departments to support effective and efficient monitoring and decision making.

The project’s design was premised on a “whole of country” approach and complements federal and provincial projects such as the Pakistan Raises Revenue Project and the KP Spending Effectively for Enhanced Development Program, which helped ensure resource allocation to priority areas for development, including in the priority areas of education, health, water supply and sanitation.


KPRMP has helped the government of Khyber Pakhtunkhwa to significantly increase tax revenue, allowing an expansion of public services to former FATA. It has increased transparency of public financial management, which has contributed to rebuilding the social contract in an area previously impacted by fragility and conflict.

During implementation, tax revenue collection increased from a baseline $99.4 million in FY19 to $216 million in FY22—a difference of more than the initial International Development Association (IDA) investment and surpassing the project’s target. Underpinning this achievement, the filing compliance of Services Sales Tax has improved from the 51 percent baseline to 77 percent in FY22. Urban Immoveable Property Tax records of six cities have been updated, digitized, and linked with the GIS map, resulting in expansion of the tax base by 54 percent.

This increase in revenue created the fiscal space for the GoKP to increase spending in priority areas like health. The health allocation in the provincial budget increased from $320 million in FY19 to $597 million, including a budget of 10 percent for the newly merged districts in FY23. This has supported the provision of universal health insurance through the Sehat Card Plus program.  Together with other projects, including the KP Spending Effectively for Enhanced Development Program, the KP Human Capital Investment Project, and the Asian Development Bank’s KP Health System Strengthening Program, the project has supported health outcomes in the KP province through increased revenue collection. The increased amount of own-source revenue mobilized (the provincial taxes) also meant that the GoKP was able to sustain its operations as well as finance an emergency response during the COVID-19 pandemic and the flood crises of 2022.

The project has also helped strengthen public financial management by substantially reducing the allocation of resources to unapproved projects from 49 percent in FY18 to 22 percent in FY23. Furthermore, 90 out of a total 113 Tehsil Municipal Authorities (local government division authorities) are using the new Financial Management Information System to record revenue and expenditures, thereby significantly boosting transparency in the stewardship of public finances.

Taxpayers’ awareness session in Pakistan
Taxpayers' awareness session - photo courtesy of KP Revenue Authority

Bank Group Contribution

This IDA-financed project was approved on June 13, 2019. The overall IDA contribution for the project is $118 million, of which $100 million is dedicated to the Program for Results supporting areas related to enhancing revenue mobilization and public resource management. Counterpart financing provided by the GoKP was $57 million, equivalent to 36 percent of the program expenditures. An additional $18 million from IDA is dedicated to support technical assistance and capacity building to enhance e-government functionality.


The implementing agencies of the Program are: KP Finance Department, Planning and Development Department, KP Revenue Authority, Board of Revenue, Excise and Taxation Department, Local Government, Elections and Rural Development Department, and KP Information Technology Board. 

Looking Ahead

Moving forward, GoKP will continue with its targeted approach to resource mobilization, prioritizing high tax potential areas for property tax digitization, and paying special attention to improved cash management based on regular consolidation of cash balances and cash plans. The implementation of e-government functionality, critical for supporting digitized service delivery going forward, will be fast-tracked. Selected services are also being digitized to facilitate citizens’ access to services as part of a broader digital transformation and digital governance roadmap of the province. 


“The world has gone digital, and we are the first ones in Pakistan to work on digitizing government processes. It will help tremendously and make it easy for our government officials who are working in the Khyber Pakhtunkhwa Secretariat.”

Mr. Shahzad Khan Bangash
Ex-Chief Secretary of the Government of Khyber Pakhtunkhwa

“The Excise, Taxation and Narcotics Control Department of the KP Government is keeping up with the digital age by digitizing its tax administration. With the support of KPRMP, the department is digitizing its tax records, which are geo-tagged and integrated with MIS. We are also digitizing record of litigation or cases most of which have tax arrears, while the e-government system will help improve efficiency in decision making. With these activities, we anticipate more efficient and transparent operations of the department, which would reduce tax compliance and administrative cost.”

Mr. Sufian Haqqani
Director, Peshawar Division
Excise Taxation & Narcotics Control Department
Government of Khyber Pakhtunkhwa

“It is usually difficult to travel to the government offices to seek guidance on basic public services or to perform our responsibilities as citizens. At times, we wait in long ques. I came to know about various ongoing activities under KPRMP, which will greatly facilitate citizens. I am also very happy that soon I will be able to interact with the government offices and tax authorities through mobile phone to pay my taxes, or to get other tax related information /services. I am excited about these activities and will certainly share about it with my relatives and neighbors, so that they can also benefit from it.”

Malik Shiraz Khan (citizen)