Engr. S.Khan

Corruption in Khyber Pakhtunkhwa (KP) is widespread and multi-form. Phantom or ghost projects, fake invoices and forged Cheques, procurement manipulation (over-pricing, single-sourcing, kickbacks), payroll/HR fraud, unauthorised retention of public money and diversion of development funds into private pockets or unrelated accounts remain persistent features of governance. Large audit reports and press investigations show hundreds of billions of rupees of irregularities at the provincial and local-government level in recent audit cycles, with especially large totals reflected in recent AGP coverage and the dramatic “Kohistan” scandal in KP that exposed Rs 36 billion embezzlement. These failures affect both local (provincial treasury) funds and externally funded projects (donor/World Bank/loan funds), as weak controls, politicized oversight, and collusion make both streams vulnerable. A recent trend indicates that corruption funds are now being transferred through cryptocurrencies into desired foreign beneficiary accounts.

Ghost Projects and Development Budget Abuse

Phantom or ghost projects and fake expenditures in development budgets are particularly attractive because large sums flow through PC-I and works accounts. Auditors repeatedly find projects that either do not exist on the ground or were billed for works never done through bogus progress certificates and fake Cheques. The KP “Kohistan” scandal stands as a clear modern example where district-level accounts showed massive withdrawals for “development,” but auditors and NAB uncovered forged Cheques, dummy contractors and Benami accounts. Recovery operations later seized properties and luxury vehicles. This represents a classic ghost-project pattern in which paper projects are created and pay orders or Cheques are generated to route money through shell accounts.

Procurement Manipulation and Contract Collusion

Procurement manipulation is equally entrenched. Many audit reports document systematic mis-procurement, inflated contracts, collusion with suppliers, splitting of tenders to avoid competitive bidding and awards to connected firms. Punjab’s AGP- flagged audit findings reported exceptionally large amounts in mis-procurement and overpayments, amounting to Rs 613.9 billion in 2025, illustrating how inflated contracts steal the development premium meant for improved infrastructure.

Donor Funds and Politicized Development Planning

Foreign and donor-funded projects are not immune. While projects supported by the World Bank, ADB, Global Fund, Islamic Development Bank and EU grants carry formal safeguards, weak implementation and gaps in local oversight allow fraud through false invoices, unsupported claims and ghost beneficiaries. Local political capture further distorts development planning, with projects often sized or located for political patronage through jobs and contracts for supporters rather than genuine public need. This produces duplicate or low-impact schemes and encourages contractors to collude with officials to extract rents.

Corruption Beyond Development: Payroll, Banking and Health

Corruption also extends beyond development spending. Payroll and HR fraud, including ghost employees, illegal appointments, salary payments to Benami accounts and irregular recruitment, are repeatedly documented in provincial audit reports and place a recurring burden on public finances. Auditors  have also identified cases of unauthorized retention and off-budget banking, where provincial entities retained consolidated fund receipts in commercial bank accounts, diverting liquidity from treasury control and creating opaque slush funds. Health-sector procurement of medicines, medical equipment and recurring consumables remains a frequent corruption target through over-invoicing and fake tenders.

Collusion: How Corruption Becomes a System

Corruption in governance is often misunderstood as the wrongdoing of a single individual or department, whereas in practice, large-scale corruption thrives on collusion. Coordinated arrangements among multiple stakeholders across institutions transform corruption from isolated misconduct into an entrenched system of rent-seeking. Recent AGP and press coverage reveal massive irregularities across KP local bodies over several years, with combined audit totals reaching hundreds of billions of rupees. The Kohistan mega scandal exposed forged Cheques, dummy contractors and an organised scheme to drain district development accounts, providing a concrete, high-profile example of the ghost-project pattern. Recovery operations have seized assets and investigations continue, while anomalies across KP suggest that around 40 percent of development funds are lost to kickbacks and corruption. Less mature procurement oversight at district offices, weaker bank controls in remote branches and opportunities created by emergency and post-flood reconstruction projects have further opened space for large-scale theft.

Structural Drivers Behind the Corruption Economy

These patterns are driven by deep structural factors. Provincial and district officials exercise large discretionary power over procurement, project approvals and payments with limited real-time public transparency, allowing rent-seeking to flourish where oversight is weak. Institutional capture and politicization enable political influence over procurement committees, public accounts committees and sometimes even audit offices, protecting culprits and blocking accountability. Fragmented accounting systems and weak IT infrastructure facilitate bogus Cheques, duplicate billing and ledger manipulation, as seen in the Kohistan forged-Cheque scheme. Gaps in banking and treasury controls at local levels allow illicit withdrawals from designated accounts, while weak, slow or selective enforcement by NAB, police and provincial accounting authorities delays accountability. Even when assets are recovered, prosecutions often take years or end in plea bargains. Low civic oversight and information asymmetry further limit accountability, as citizens and local media lack access to project-level financial data, PC-Is and contract documents. Supply side capacity constraints, including low pay, weak training and staff shortages in audit and procurement units, encourage negligence or collusion, while perverse incentives in development programming prioritize politically visible but low-value projects over quality and value-for-money.

THE 2025 CORRUPTION LANDSCAPE

Kohistan Corruption Scandal

Kohistan Corruption Case is the largest corruption case in KP’s history, both in scale (Rs 36 billion) and complexity (fake cheques, shell contractors & senior officials involved), covering period from 2016 to 2024. In April 2025, NAB started a probe regarding the misappropriation of government funds in ‘KP Government Contractors Security Deposit Account’. NAB inquiry has exposed a well-planned embezzlement of more than Rs.36 Bn so far, from public accounts in Upper Kohistan (funds are not restricted to Kohistan Only). NAB has recovered Rs 22.14 billion, while an inquiry is in process for more recoveries. The case is an epic example of white-collar crime, spread across entire KP, revealing connivence of all stakeholders.

Cities Improvement Project (KPCIP) Scandal

Cities Improvement Project (KPCIP), a Rs 97 billion ($600 million) worth urban infrastructure and municipal services program, was launched in late 2022 in Peshawar, Abbottabad, Kohat, Mardan, and Mingora. It has been jointly financed by Asian Development Bank (ADB), the Asian Infrastructure Investment Bank (AIIB) and the KP government, with a targeted completion by the end of 2026. An audit report in February 2025 uncovered Rs 8.48 billion in discrepancies in the same program spread across various categories, including ghost works, inflated costs, unauthorized design changes, excessive consultancy fees, overpayments and breach of procurement norms. Misappropriations included Rs 8.8 million for non‑executed tasks, Rs 34.9 million in fake measurements, Rs 5.48 million on unstated excavation and inflated vehicle purchases, among others. Moreover, provincial assembly members petitioned the Public Accounts Committee (PAC), alleging Rs 32 billion in further irregularities. According the provided data, contracts have been awarded to unregistered firms, disbursements for minimal on-ground work, false progress reports, and tax evasion.

Government Accounts Audit & irregularities – Estimated Amount (200 billion)

Irregular procurement, overpayments in salaries and dubious contracts were documented in dozens of cases. Broad provincial audit findings in 2025 uncovered extensive issues across multiple departments:

• Rs 982 million in alleged fake payments and fictitious expenditure.
• Rs 14 billion in irregular budgeting and fund releases.
• Rs 4 billion in unauthorized expenditures.
• Rs 11.6 billion losses due to various cases.

World Bank Project Scam – Estimated Amount (106 billion)

A departmental inquiry uncovered Rs106.04 million fraud in the KP Human Capital Investment Project (World Bank-supported), involving forged cheques and fraudulent withdrawals. Investigators recommended FIRs, exit control list actions and forensic audits

Timber Scam – Estimated Amount (1.7 billion)

An illegal timber trade scam worth about Rs1.7 billion was exposed, highlighting corruption and welfare negligence in the forestry department.

Finance Department Recruitment Scandal

In April 2025, media reported a major scandal within the Khyber Pakhtunkhwa (KP) Finance Department, revealing 88 illegal recruitments, which have caused a financial loss exceeding Rs. 440 million to the provincial government exchequer.  Documents show that these recruitments were made without following the required legal procedures. Official advertisements, recruitment committees and necessary approvals from relevant authorities were all bypassed. According to the report, several officials within the Finance Department and the Accountant General (AG) Office were involved in the illegal hiring process. Additionally, crucial employment documents such as service books and medical records for all 88 employees were missing. When the scandal was exposed, most of the implicated employees were quickly transferred to other departments.