The Government of Khyber Pakhtunkhwa has taken a historic and revolutionary step by completing the draft of the “Khyber Pakhtunkhwa Local Government (Accounts and Financial Reporting) Rules, 2025.” This initiative marks a major milestone in improving the system of public financial management in the province, as for the first time in Pakistan’s history, it introduces the International Public Sector Accounting Standards (IPSAS) for local governments, based on the internationally recognised Accrual Basis of Accounting.
Previously, the financial regulations, namely the N.W.F.P. Accounts Rules, 1980, were limited only to the Tehsil Municipal Administrations (TMAs). These outdated rules relied on the Personal Ledger Accounts (PLAs) system and cash-based recordkeeping, which caused serious challenges, including a lack of financial accountability and inaccurate reporting.
The new rules, however, are not confined to TMAs alone; they will now apply to nearly 4,500 local government offices, including the Capital Metropolitan Government Peshawar, all TMAs, rural-level Village Councils (VCs) and Neighbourhood Councils (NCs), as well as urban development authorities such as the Peshawar Development Authority (PDA), Urban Area Development Authorities (UADAs), LUBCA, and the Water and Sanitation Services Companies (WSSCs).
Under these new rules, financial reporting will move beyond mere cash transactions to present a complete financial picture. Asset Registers will be developed to record the accurate value of public lands, buildings, infrastructure, and equipment, while Liability Ledgers will be introduced to properly account for pensions, payables, and financial obligations. Based on IPSAS, local governments will prepare comprehensive monthly and annual financial statements.
This system will enhance accuracy in financial planning and budgeting, ensure better financial control over development projects, and provide the public with a clearer understanding of how their resources are being utilised.
This reform will not only align Khyber Pakhtunkhwa’s public financial management with international standards but also significantly strengthen the province’s financial credibility. It will enhance the capacity of local governments, improve transparency, and boost investor confidence in development financing.
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These rules will be formally enacted soon, after which an extensive training and capacity-building program will be launched for all financial and administrative staff.
