Additional Regional Transfers Deemed Necessary for 490 Local Governments Facing Fiscal Pressure

Jakarta (ANTARA) - Yusuf Rendy Manilet, an economist at the Center of Reform on Economics (CORE), has assessed that the plan to increase transfers to regions (TKD) for 490 regional governments is a much-needed solution to maintain the continuity of regional operations.

“The plan to add transfers to regions for around 490 areas experiencing fiscal pressure is an appropriate step to address short-term needs,” Yusuf said when contacted by ANTARA in Jakarta on Wednesday.

According to him, many regional governments face fiscal constraints in the 2026 fiscal year, particularly in meeting personnel expenditure, including salaries of contractual government employees (PPPK), as well as financing basic services.

Therefore, the additional transfers are essential so that government operations and public services continue to run without placing greater pressure on regional finances.

However, he added, this policy does not resolve the fundamental problem from a long-term fiscal perspective.

He believes many regions remain highly dependent on central transfers because their locally generated revenue (PAD) capacity has not developed optimally.

“This means additional TKD will only serve as a temporary cushion if it is not accompanied by efforts to strengthen regional revenue sources,” he said.

For this reason, Yusuf suggested that the additional budget should be accompanied by clear performance indicators, oversight of fund usage, and encouragement of spending efficiency to avoid moral hazard, a situation in which regions become increasingly reliant on central assistance and lose the incentive to improve their fiscal independence.

Going forward, the government is also urged to ensure that additional TKD is allocated based on genuine fiscal needs rather than distributed evenly.

At the same time, reforms to strengthen PAD through optimising regional taxes, asset management, and investment cooperation must continue to be pursued.

“With such an approach, additional TKD would not only be a short-term solution but also a transition towards a healthier and more sustainable regional fiscal structure,” he said.

Earlier, Minister of Finance Purbaya Yudhi Sadewa announced the plan to increase TKD allocations for 490 regional governments facing budget constraints to finance mandatory spending.

However, the implementation of the plan is still awaiting a decision from President Prabowo Subianto.