Home Affairs Minister Reminds Regional Governments to Be More Creative in Boosting Local Own-Source Revenue

Home Affairs Minister Muhammad Tito Karnavian has reminded regional governments to be more creative in boosting local own-source revenue (PAD). He highlighted the high fiscal dependency of regions on the central government. This was conveyed during his remarks at the Deliberation on Development Planning (Musrenbang) for the Regional Government Work Plan (RKPD) of North Sulawesi Province for 2027, held at the Mapalus Building in the North Sulawesi Governor’s Office today. He explained that most regions in North Sulawesi have a relatively small PAD portion compared to central transfer funds. “If you only rely on this budget (central transfer funds), it’s tough,” Tito said in a written statement on Thursday (9/4/2026). According to him, this situation is exacerbated by high employee expenditure in the Regional Revenue and Expenditure Budget (APBD). In several regions, employee spending even reaches more than 50 percent of the total budget, severely limiting fiscal space for development. He emphasised that the mindset of regional government apparatus needs to change. So far, the bureaucracy has tended to focus only on spending without considering efforts to increase revenue. Therefore, he encouraged regional heads to adopt an entrepreneurial mindset in managing regional finances. Tito stated that the basic principle of financial management must ensure that revenue is greater than expenditure. “The basic principle is how to make revenue higher than expenditure, don’t reverse it,” he explained. Furthermore, Tito outlined several steps that regions can take in managing budgets, including increasing PAD. First, implementing spending efficiency, particularly operational expenses such as official travel, meetings, and non-priority activities. Second, exploring new revenue sources without burdening small communities. He also encouraged regional governments to revitalise the private sector through investment and permitting facilitation. One effort that can be done is building a Public Service Mall (MPP) to accelerate business permitting processes. Regional heads can also involve organisations in the business sector to revitalise the private sector. “There is Kadin (Indonesian Chamber of Commerce and Industry), there is Apindo (Indonesian Employers Association), invite them to discuss to enliven the private sector. Investment doesn’t have to be from abroad, domestic can too, local can too,” he concluded.