Finding Middle Ground in the Revenue-Sharing Fund Row
Jakarta (ANTARA) - The wave of criticism levelled by most regional governments at the Finance Ministry’s policy of significantly reducing revenue-sharing funds (DBH) for the 2026 fiscal year is entirely understandable.
Total regional transfer spending (TKD) for 2026 is set at Rp692.99 trillion, down 24.6 per cent from Rp919.8 trillion the previous year, with the DBH component bearing the deepest correction in history, at around 69.5 per cent.
The impact is keenly felt: East Kalimantan faces potential cuts of up to 75 per cent, central transfers to South Kalimantan have shrunk from Rp4.5 trillion to Rp2.2 trillion, and DKI Jakarta has been forced to revise its regional budget from Rp95 trillion to Rp79 trillion after its DBH projection was cut from a target of Rp15 trillion to around Rp11 trillion.
In this context, the first point I wish to convey is that the public and regional governments need to understand the fundamental character of DBH. Unlike the general allocation fund (DAU), a block grant designed to close fiscal gaps between regions, DBH is conceptually a revenue-sharing instrument whose amount is directly tied to realised state revenue from specific sources, ranging from taxes, oil and natural gas, minerals and coal, forestry, to excise on tobacco products.
When revenue from these sources weakens due to external pressures (such as when the rupiah touched Rp18,000 per US dollar in June 2026), the prices of several global commodities automatically soften, and realised tax revenue is almost certainly below the initial assumptions made before the crisis occurred.
This condition provides the normative basis for the possibility that the DBH distributed to regions will shrink. This phenomenon can be seen as the mathematical consequence of how the revenue-sharing mechanism itself works, as it is indeed designed to follow the fluctuations of actual state revenue.
The legal basis for this policy is also clear. Law Number 17 of 2025 on the 2026 State Budget stipulates that DBH disbursement refers to the realisation of state revenue shared in the current year. This provision aligns with the constitutional duty of the Finance Minister, as the state’s general treasurer, to keep the budget deficit at a safe level.
In the 2026 State Budget posture itself, the deficit is designed at 2.68 per cent of GDP, below the 3 per cent ceiling required by Law Number 17 of 2003 on State Finances. This discipline is indeed painful for regions in the short term, but it is a prerequisite for maintaining rupiah stability, inflation control, and financial market confidence.
It should also be underlined that the DBH ‘underpayment’ mechanism occurring this year is nothing new, nor is it outside the law. Provisions governing the determination and settlement of DBH underpayments and overpayments have long been regulated through finance minister regulations and have been a routine part of the fiscal transfer cycle for years, long before this year’s fiscal pressures emerged.
The Finance Ministry has also shown its commitment to settling these obligations gradually as fiscal space becomes available, such as the disbursement of DBH underpayments to several regions, including Maluku Province, in August 2026.