The adjustment of regional transfer funds (TKD) from the central\ngovernment has had a tangible impact on hundreds of local governments.\nNot only are they facing difficulties in paying employee salaries, but\nmany local governments are also struggling to build or repair regional\ninfrastructure. Dozens of local governments have been forced to seek\nloans to overcome budget constraints for development.<\/p>\n
Amidst the rising cases of corruption by regional officials, the\ncentral government\u2019s policy to adjust TKD can be accepted and supported\nby various elements of society. Between 2004 and 2025, 201 regional\nheads were involved in corruption cases. Furthermore, as of late July\n2026, 12 regional heads have been caught in sting operations by the\nCorruption Eradication Commission (KPK). Therefore, the TKD adjustment\nis necessary as a shock therapy for the regional bureaucracy.<\/p>\n
Ideally, the adjustment of TKD from the centre should not create side\neffects or problems for the regions. However, former Finance Minister\nPurbaya Yudhi Sadewa previously revealed that many local governments\nfaced budget shortages following the TKD adjustment. Approximately 490\nlocal governments required additional funding from the central\ngovernment to pay salaries and cover minimum operational needs.<\/p>\n
The problems faced by many local governments do not end there. A\nsignificant number of local governments are struggling to develop and\nmaintain regional infrastructure due to budget limitations. To address\nthese constraints, dozens of local governments are seeking loans. In\naddition to loans from financial institutions, local governments are\npermitted to obtain loans from the State Budget (APBN) based on\nGovernment Regulation (PP) No.\u00a038 of 2025. Many local governments are\nseeking loans because of low local original revenue (PAD), and the value\nof transfers from the centre is insufficient to cover large capital\nexpenditure needs.<\/p>\n
If the side effects have reached this level, it may be because the\nscale of the TKD adjustment is too extreme and the calculations were\ninaccurate. It can be argued that the calculations were inaccurate\nbecause the TKD adjustment from the centre is disrupting the financial\nmanagement of hundreds of local governments, rendering them unable to\npay salaries. The total value of TKD cuts as of 2025 was recorded at Rp\n50.59 trillion.<\/p>\n
For this year, after being cut by approximately 20 per cent to 24 per\ncent\u2014around Rp 171 trillion\u2014the TKD budget allocation in the 2026 APBN\nwas set at Rp 693 trillion. With a reduction of this magnitude,\nprovinces or regencies with low PAD will undoubtedly face serious\nproblems. Consequently, in addition to seeking loans, many local\ngovernments are increasing and establishing new tax objects that place a\nheavy burden on local communities.<\/p>\n
Recently, the initiatives of the Jakarta and North Maluku provincial\ngovernments have drawn significant attention. The Jakarta Provincial\nGovernment is finalising plans to issue regional bonds (Jakarta Bond)\nvalued between Rp 5.2 trillion and Rp 5.6 trillion.<\/p>\n
The plan is to draw funds gradually starting in 2027. This\nalternative financing method is being pursued because Jakarta requires\nfunds to finance several long-term infrastructure projects crucial for\nits residents. These include the continuation of the Jakarta LRT Phase\n1C (Manggarai-Dukuh Atas route), the construction of the Sumber Waras\nRegional General Hospital (RSUD), the development of retention ponds,\nreservoirs, and drainage facilities, as well as the construction of new\nschool buildings and low-cost apartments.<\/p>\n
This initiative by the Jakarta Provincial Government has certainly\nattracted attention. Among all provinces, Jakarta always records the\nhighest PAD, primarily sourced from local taxes such as motor vehicle\ntax and land and building tax. As of 2025, Jakarta\u2019s PAD reached Rp\n51.22 trillion. However, the TKD adjustment has significantly impacted\nJakarta\u2019s finances. Jakarta\u2019s TKD for 2026 was cut by Rp 16 trillion,\ncausing the Jakarta Regional Budget (APBD) to shrink from Rp 95.35\ntrillion to Rp 81.32 trillion.<\/p>\n
Previously, the Governor of North Maluku, Sherly Tjoanda Laos,\nproposed a regional loan of Rp 1 trillion to accelerate the development\nof roads and bridges across 10 regencies\/cities. This acceleration is\nconsidered urgent to achieve regional connectivity in previously\ninaccessible areas and to address infrastructure inequality.<\/p>\n
This loan initiative was prioritised because the TKD cut for North\nMaluku reaches Rp 800 billion in 2026. The loan is planned as a standby\nloan to be disbursed gradually to maintain regional fiscal space amidst\nbudget pressures, and as an anticipation for further TKD cuts from the\ncentre in 2027.<\/p>\n
It is not only these two local governments seeking loans. Records\nfrom PT Sarana Multi Infrastruktur (SMI) indicate that 94 local\ngovernments have applied for loans to finance infrastructure projects.\nThe central government also permits local governments to obtain loans\nfrom SMI. The repayment of these loans is instalment-based, using\nrevenue sharing funds (DBH) which are part of the TKD from the\ncentre.<\/p>\n
The mechanism of local government debt repayment to SMI using DBH or\nreductions in TKD tends to continuously weaken local government\nfinances. Building new infrastructure or repairing existing\ninfrastructure is a continuous necessity. Both the central government\nand all local governments must build roads, bridges, and provide\nnetworks for clean water, irrigation, ports, and drainage. Other\nobligations include providing healthcare facilities, educational\nfacilities\/school buildings, electricity supply, public spaces, and\ndigital infrastructure such as internet networks and telecommunications\nsignals.<\/p>\n
Various types of infrastructure require routine maintenance costs.\nFurthermore, natural factors, such as high rainfall and flooding, often\ndamage many road sections, bridges, and drainage channels in both public\nand residential areas. Not to mention damage caused by other factors. As\na comparison, the value of damage to infrastructure and public\nfacilities in Jakarta due to unrest in August 2025 reached Rp 80\nbillion.<\/p>\n
Another example involves community grievances that local governments\nmust address. Throughout the period\u2026<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/regional-transfer-adjustments-should-ideally-not-create-side-effects-for-local-governments-1789617522", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }