Government to Prepare Scheme if Regional Employee Spending Has Not Reached 30%
Deputy Interior Minister Bima Arya Sugiarto has warned of a potential “time bomb” regarding the obligation to limit employee spending to a maximum of 30% in regional budgets, which will take effect in January 2027. He noted that to date, the majority of regional governments have yet to meet this threshold.
“This 30% employee spending issue is indeed a time bomb, isn’t it? January 2027. Data shows that most are still above 30%, with only a minority below it,” said Bima Arya at the Appreciation for High-Achieving Regional Governments 2026 event, a collaboration between detikcom and the Interior Ministry, in Palembang, South Sumatra, on Saturday (25/4/2026).
The regulation refers to the Law on Financial Relations between the Central Government and Regional Governments, which governs the composition of regional spending to make it more productive and not overly absorbed by employee expenses.
Nevertheless, Bima explained that the central government has prepared adjustment schemes for regions unable to meet the limit. Under the regulation, the decision will rest with the Finance Minister after consulting with the Interior Ministry and Bappenas.
“But the Law on Regional Government Financial Relations, in Article 146 I believe, essentially states that if it cannot meet 30%, the Finance Minister will make a decision after consulting with the Interior Ministry and Bappenas, something like that. But the outcome is not about postponing; it’s more about the amount,” he said.
Bima Arya sought input from regional heads regarding the scale of employee spending. Moving forward, the government is considering grouping regions based on their fiscal capacity.
Options under discussion include dividing regions into categories, such as those already below 30%, those in the 30-40% range, and those far above the limit.
“So we will seek input on what the format of the amounts should be like. Yesterday, there was a discussion with the Minister; perhaps there will be categories there, regions already below 30%, regions roughly in the 30 to 40 range, or something like that, according to fiscal capacity. So the clue is heading that way,” he stated.
This event is part of the central government’s efforts to encourage improved regional performance through fiscal incentives. The policy refers to Law No. 1 of 2022 on Financial Relations between the Central Government and Regional Governments, which allows for performance-based awards.
Additionally, the implementation of this programme is reinforced by regulations on regional financial management as stipulated in Government Regulation No. 12 of 2019.
In this event, several provincial, regency, and city governments in Sumatra will receive appreciation in four main categories: Inflation Control, Reduction in Unemployment Rate, Poverty Alleviation and Stunting Reduction, and Entrepreneur Government/Creative Financing.
The event in Palembang, South Sumatra, serves as the opening for a national series of activities to be held across six islands in Indonesia.
In addition to the award ceremony, the event will feature the National Accelerator Forum, a collaborative platform bringing together the central government, regional governments, business actors, investors, SMEs, academics, and the general public in one forum for dialogue and action.
The Appreciation for High-Achieving Regional Governments 2026 and the National Accelerator Forum will feature detikcom’s Editor-in-Chief Alfito Deannova Gintings as moderator.
The event is also attended by the Ministry of Health (Kemenkes), Ministry of Finance (Kemenkeu), National Development Planning Agency (Bappenas), and Central Bureau of Statistics (BPS). All regional heads in Sumatra, from governors to regents and mayors, are also present.