Khyber Pakhtunkhwa (KP) is one of theleast-developed and crisis-prone provinces in Pakistan.Located in far north of the country, the province covers 10percent of the total land area and is a home to 13 percentof the country's population spread over sevenadministrative districts. Majority of the population (83percent) is rural, averaging 7.6 members per household-wellabove the national average of 6.6. The literacy rate remainslow at 49 percent with more than half of population havingno access to tap water while unemployment runs at 8.5percent. KP's relative underperformance is primarilydue to low levels of growth, socio-economic underdevelopmentand lack of public services compared to other provinces ofPakistan. Cognizant of the challenges to growth in KP andacting upon the assessment of Pakistan Government'sPost-Crisis Needs Assessment (PCNA) of the region in October2010, the donors agreed on a harmonized approach to meet theshort- and medium-term social and economic needs of KP,including the establishment of a Multi-Donor Trust Fund(MDTF). This Public Expenditure Review (PER) of KP wasundertaken in partnership with the government of KP and isone of the important outcomes of PCNA funded by the MDTF.The report on Operationalization of Post Crisis NeedsAssessment (OPCNA) highlighted the need for strengtheningKP's public financial management (PFM) as fundamentalto improving public services and therefore the quality oflife in KP. The report acknowledges the strong governmentownership of reform initiatives which are taken with a viewof strengthening all aspects of public finances. KP adopteda comprehensive fiscal reform program in 2001-02 based onfour pillars, namely: 1) enhancing resources; 2)strengthening ex-ante and ex-post PFM reforms; 3) fiscaldecentralization; and 4) instituting an output-basedaccountability mechanism.
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