Finance Ministry Urges Regional Governments to Seek New Funding Sources, from Taxes to Sukuk

The Ministry of Finance is encouraging regional governments to strengthen their own financial capacity amid ever-increasing development needs. Regions are not only asked to rely on Transfers to Regions (TKD), but also to optimise locally generated revenue (PAD) and utilise other sources of financing.

Acting Director General of Fiscal Balance at the Ministry of Finance, Nufransa Wira Sakti, said that strengthening PAD can be carried out through optimising regional tax opsen, improving the database of tax objects, and digitalising collection.

“Strengthening PAD is carried out, among others, through optimising regional tax opsen, improving the database of tax objects, digitalising collection, and improving retribution governance, while still paying attention to the public’s ability to pay,” Nufransa told Republika on Tuesday (18/8/2026).

In addition to increasing revenue, regions can also utilise creative financing to meet investment needs. Regional investment needs are considered to be increasingly large, while the fiscal space of both the central and regional governments still needs to be maintained.

Nufransa mentioned a number of schemes that regions can use, including loans through PT Sarana Multi Infrastruktur (SMI), public-private partnerships (KPBU), funding synergy, and the issuance of regional bonds and sukuk.

However, the use of these financing sources must still be carried out carefully and in accordance with regulations. Regional governments are also encouraged to develop potential economic sectors and create a conducive business climate so that local economic activity also strengthens regional revenue.

In addition, the Ministry of Finance is encouraging regional governments to strengthen PAD by improving the tax and retribution collection system. This step is considered capable of expanding regional revenue without ignoring the public’s ability to pay.