The Ministry of Finance and the House of Representatives’ Budget Committee have agreed to raise the allocation for regional transfers (TKD) in the 2026 state budget.
In the initial draft of the 2026 State Budget (RAPBN 2026), the TKD allocation was set to decline by around 24.7 percent compared to 2025, sparking controversy across many regions.
“Regional transfers, which were originally set at Rp649.995 trillion (US$39 billion), will now increase to Rp692.995 trillion, or up by Rp43 trillion,” House Budget Committee Chairman, Said Abdullah, during a hearing with the Finance Ministry on Thursday, September 18, 2025.
Said cited that the adjustment was made following requests from various DPR commissions. He also noted that the previous cut to TKD was widely seen as one of the reasons behind the spike in land and building tax (PBB) bills in several regions.
Finance Minister Purbaya Yudhi Sadewa stressed that the revision also took into account input from local governments. “This is to maintain short-term social and political stability in the regions,” Purbaya said.
In recent months, many residents have voiced complaints over steep increases in their PBB bills. One notable case occurred in Pati Regency, Central Java.
Syafruddin Karimi, an economist at Andalas University, argued that the PBB hikes cannot be separated from the financial pressures faced by local governments. According to him, shrinking TKD allocations from the central government coupled with rising mandatory spending have pushed local leaders to seek new revenue sources by raising PBB.
“Dwindling local cash reserves forced regional heads to raise PBB,” Syafruddin said, while adding that public protests were justified, as citizens demand fiscal policies that are proportional, fair, and aligned with people’s economic capacity.
He warned that without such balance, local governments risk losing legitimacy, and the threat of social unrest could intensify. “The wave of protests against PBB hikes reflects social anxiety rooted in everyday economic realities,” he said.
Syafruddin further noted that the increase in PBB was not matched by improvements in public services. The added burden, he said, directly eroded household purchasing power, while road repairs, healthcare facilities, and other basic infrastructure often showed little tangible progress.
Meanwhile, Mohammad Faisal, Executive Director of the Center of Reform on Economics (CORE) Indonesia, said that limited fiscal capacity is a common problem faced by most local governments across the country. “Only a small number of regions have a sufficiently healthy fiscal capacity,” he said.
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