Higher education is a rich cultural and scientific asset that prepares students for future challenges besides promoting economic, technological, and social change in society. Primarily, it is the public sector universities and higher educational institutes (HEI’s) that encourage exchange of knowledge, research and innovation. It also equips students with skills and expertise required to meet the ever changing demands of labor markets, and overseas employment and expedite engine of economic growth in Pakistan. Despite enormous significance of higher education in the country’s socioeconomic development, majority of public sector universities in Khyber Pakhtunkhwa were currently facing financial crisis, which are adversely affecting the process of learning and research studies besides negatively impacting on students’ enrollment in MS, M.Phil and PhD programs in the province. Out of total 34 public sector universities including 24 general and 10 specialized in engineering, technology, agriculture, medical, animal husbandry and management sciences for 40,856,097 population with 1,298,278 persons per university, seven public sector universities including UET Peshawar, Gomal University DI Khan, Agriculture University Peshawar, University of Science and Technology Bannu, Shaheed Benazir Bhutto University Peshawar and University of Shangla were facing significant financial crunch due to pension liabilities and depleting budgets balances. The KP Universities 2021-24 Report has revealed that the initial balances of budgets of 34 public sector universities and HEI’s, which was Rs 6,560 million in 2021-22 has been decreased to Rs 5,316 million in 2022-23 and was further slashed to Rs 4,740 million in 2023-24. A significant concern is predominant allocation of expenditures towards current operations, with no provision for capital expenses of funds creation due to substantial weight of establishment charges. The decrease of opening of balance budgets of these universities has not only created serious financial challenges but also encompassed financial fluctuations as well as economic stagnation for research studies, salaries and pensions. During the last three-years, the provincial grant to public sector universities which was Rs 3,962 million in 2022-23 was slashed to Rs 3276.125 million during 2023-24 and only Rs 1231.897 million were recorded during 2021-22. The financial crisis in most universities has been further deepened after nonpayment of the promised annual provincial grants of Rs 3,000 million, impacting negatively on the universities’ abilities to maintain infrastructure, support academic programs, research studies and ensure quality in education disciplines. However, the federal grants to KP universities had witnessed a substantial growth i.e. Rs 10,133.214 million in 2021-22, Rs 10,909.202 million in 2022-23 and Rs 10,954.014 million in 2023-24. But 18 universities of KP have faced decrease in federal grants including University of Agriculture Peshawar, University of Lakki Marwat, Abbottabad University of Science and Technology, Shaheed Benazir Bhutto Women University Peshawar, University of Haripur, Bacha Khan University Charsadda, Fata University Kohat, University of Science and Technology Bannu, Hazara University, University of Swabi, Khushal Khattak University Karak, Women University Swabi, Shaheed Benazir Bhutto University Dir Upper, Gomal University DI Khan, KMU, Institute of Management Sciences, Islamia College Peshawar University and University of Malakanad during 2022-23 and 2023-24. Similarly, no provincial grant was received by University of Agriculture Peshawar in 2021-22 and 2023-24, University of Buner and UET Peshawar during the current fiscal year. Moreover, University of Engineering and Applied Sciences Swat, University of Chitral, Abdul Wali Khan University Mardan, Institute of Applied Sciences and Technology Haripur and Gomal University DI Khan had received no provincial grants during 2021-22. Despite provision of Rs 20 billion grants to old universities, the situation was still dismal and regular support of Higher Education Commission was imperative to stand the recently established universities on their own feet in KP. In the last three years, the annual receipts of these universities were Rs 46 billion while annual expenditures remained Rs 41 billion. Despite reforms and interventions, KP’s universities saw only modest revenue growth of Rs 7 billion in 2021 and Rs 2 billion in 2022, thus falling short of the mandatory progressive targets. Alike, university surpluses for 2021 and 2022 were Rs 4,113 million and Rs 3,938 million while only Rs 545 million surplus projected for current fiscal year due to over-recruitment, high inflation, lack of saving and poor performance. “The poor health of the majority of universities was exposed by the report prepared by the Governor Secretariat that needs attention of all stakeholders,” said Professor Dr Muhammad Naeem, former Chairman Economics Department, University of Peshawar while talking to APP. He said 20 out of 34 universities were likely to face budget deficits at the close of the current financial year while 27 universities allocate more than 50 pc of their budgets to establishment expenditures, needing realignment of priorities on war footing basis. “The opening of new universities in far flung areas for political purposes has negatively impacted research studies besides MS/MPhil and PhD programs. No student was enrolled in MS/M.Phil programs at University of Shangla, University of Agriculture Swat, Fata University and Buner University while significant decrease was witnessed in students’ enrollment in undergraduate programs at Shaheed Benazir Bhutto Women University with 4643 students in 2021-22, 4473 in 2022-23 and 4347 in 2023-24 while in University of Peshawar, only 8161, 7011 and 7675 students were registered during the said years respectively.”