Finance Ministry sets 2027 regional transfer budget at 2.5-2.7% of GDP

Director General of Fiscal Balance at the Ministry of Finance, Askolani, stated that the ratio of the Transfer to Regions (TKD) budget in the 2027 Macroeconomic Framework and Fiscal Policy Principles is set at between 2.5 and 2.7 percent of Gross Domestic Product (GDP). “We are prioritising this TKD allocation to support basic regional spending, namely for civil servant salaries, local government operations, and basic public services,” Askolani said during a meeting with the House of Representatives’ Budget Committee in Jakarta on Tuesday. He added that the budget will also be focused on reducing fiscal inequality, encouraging better fiscal synergy between central and regional governments, and supporting regional competitiveness for higher quality development. The TKD budget is distributed in several forms, including Revenue Sharing Funds (DBH), General Allocation Funds (DAU), Special Allocation Funds (DAK), Special Autonomy Funds (Otsus), Privilege Funds, and Village Funds. Askolani conveyed that the central government will align the allocation of DBH with state spending policies to support regional government operations. The government also plans to strengthen data quality and the DBH calculation formula using an adequate information technology system. Meanwhile, DAU is specifically directed to meet the needs of regional government administration, basic public services, and development in underdeveloped, frontier, and outermost (3T) regions. This includes the salaries of State Civil Apparatus (ASN) serving in the regions, rehabilitation of schools and other educational infrastructure, provision of health facilities and equipment, and payment of National Health Insurance (JKN) contributions financed by the government. “This is our commitment so that the outermost regions truly receive attention from the government, from cross-ministerial institutions, to strengthen development in their areas,” Askolani said. Regarding the Special Allocation Funds (DAK), he stated that the government prioritises the budget for realising various national priority programmes, improving public services, and regional affirmation. Meanwhile, Special Autonomy Funds (Otsus) are allocated in line with the master plan for accelerating development in Papua. In addition to the special autonomy funds, additional infrastructure funds are also prepared for new autonomous regions (DOB) in Papua. The government is also drafting governance regulations to support the sustainability of the distribution of special autonomy funds for Aceh, which will end in 2027. “Then, for the privilege fund policy, specifically for the Special Region of Yogyakarta (DIY), we will sharpen its focus on reducing poverty levels, empowering the community economy and MSMEs, and addressing inter-regional disparities,” Askolani said. Lastly, regarding Village Funds, he explained that the budget will be utilised to support poverty alleviation, food security programmes, and rural infrastructure development. In addition, the funds are directed to strengthen the role of the Red and White Village Cooperative (KDMP) in line with central government priorities. “Our hope is that the role of KDMP will become more tangible, more implementable, and truly able to strengthen the economy down to the village level,” Askolani added.