The government has reduced the allocation for Regional Transfer Funds (TKD) in the 2026 Draft State Budget (RAPBN). The cut, amounting to Rp650 trillion or a 24.7 percent decline from Rp864 trillion in 2025, is expected to significantly affect infrastructure development across the regions.
Professor Wahyudi Kumorotomo, a faculty member at the Department of Public Policy and Management, Faculty of Social and Political Sciences, Universitas Gadjah Mada (Fisipol UGM), said the policy to reduce TKD is highly unusual and poses serious risks to the continuity of regional development.
He noted that while state spending in the draft budget is projected to increase by 17.7 percent, TKD has been slashed by 24.7 percent, equivalent to Rp269 trillion.
“For the Free Meal (MBG) program, the allocation has increased fivefold to Rp335 trillion, yet transfers to the regions, which could sustain development and create jobs, are being cut by a very significant amount,” said Professor Kumorotomo on Monday (Sep. 8).
According to him, the reduction of TKD, which includes the General Allocation Fund (DAU) and Special Allocation Fund (DAK), will have a serious impact on the continuation of development in many regions.
Several areas may no longer be able to continue with infrastructure projects, such as roads, bridges, or telecommunications facilities, that are already underway.
“Even poverty alleviation programs are likely to be sacrificed if much less can be expected from TKD,” he explained.
Professor Kumorotomo further argued that Indonesia’s fiscal decentralization policy, initiated in 2001, has largely failed. Instead of strengthening independence, many regional governments have become increasingly dependent on central transfers.
“This has created a flypaper effect, like flies attracted to paper coated with bait and glue. With the presence of balancing funds, many regional governments increase spending but make little effort to raise local revenue (PAD) or develop independent sources of income. On average, PAD accounts for only 24.18 percent of regional budgets (APBD),” he said.
He predicted that the sudden and drastic reduction in TKD would bring short-term political, economic, and social consequences.
“Regions that want to continue their priority programs will try to maximize local revenue. The most feasible instruments are increases in property taxes (PBB) and other local taxes,” he noted.
The policy, he warned, risks triggering social unrest if not properly managed. He pointed to recent cases of violent demonstrations and mass disobedience in Pati as examples that could spread, particularly in regions planning steep tax hikes such as Banyuwangi, Cirebon, Semarang, Jeneponto, and Bone.
“In an economy that remains bleak, higher local levies, especially when accompanied by arrogant and insensitive statements from local leaders, could have highly explosive social consequences,” he concluded.
Author: Bolivia Rahmawati
Editor: Gusti Grehenson
Illustration: Antara