The Khyber Pakhtunkhwa (KP) and Azad Jammu and Kashmir (AJK) Finance Ministers presented their respective budgets for 2015-2016 on June 15. KP’s budget is a balanced one, with about three quarters of the revenues (Rs 371 billion) coming from the Centre and a considerable chunk of the remainder coming from foreign aid (Rs 33 billion). There is very little revenue from KP’s own resources, which is probably why the development expenditures are low (Rs 174.884 billion of the total Rs 488 billion outlay). As a percentage, funds spent on education will remain the same in the next fiscal year as the year before. The Pakistan Tehreek-e-Insaaf’s (PTI’s) sloganeering about increasing government spending on education has failed to translate practically in KP. The salaries and pensions of government employees have been raised by 10 percent, even though the PTI had criticised the federal budget for not increasing them enough (Imran Khan wanted 15 percent). Similarly, most of AJK’s deficit budget (Rs 56.5 billion out of the total Rs 68 billion) has been allocated to current expenditures and not a lot to development, education and new projects. The fact that both KP and AJK’s budgets are tax-free (although some adjustments to existing taxes have been made) shows that the provincial governments do not consider generating more local revenues by levying new taxes a priority. Insufficient revenue generation and poor tax collection is a nationwide problem, and it is the negligence of both the federal and provincial governments that they have failed to increase revenues and expand the tax net. The federal revenues given to the provinces have also not been increased and the National Finance Commission (NFC) Award has yet to be updated. Negotiating a new NFC Award with the provinces can be a long and complicated process. The federal government started the process rather late and could not meet the June 30 deadline. The existing NFC Award has been extended for a year and the provinces, particularly KP and Sindh, have been protesting the distribution of resources and the cutting down of vertical development projects. Any increase in federal transfers to the provinces has been deferred for an additional year, even though these budgets show that the smaller provinces desperately need an increased influx of federal funds. The Centre has given an additional Rs 30.146 to KP because of the ongoing anti-terrorism operations there, but the considerable arrears in the profits from hydel power generation have still not been paid. The budgets of these largely underdeveloped provinces reflect that neither the provincial nor federal governments are serious about generating new revenues for development. Given Pakistan’s severe energy crisis, it is also disappointing to note that no attention has been paid to the power sector in both these provincial budgets. *