The Ministry of Finance and the House of Representatives’ (DPR) Budget Committee (Banggar) have agreed to raise the allocation for regional transfers (TKD) in the 2026 state budget by Rp43 trillion (US$2.6 billion).

The adjustment increases the total TKD from the initially proposed Rp649.995 trillion to Rp692.995 trillion. The decision was made following controversy over the earlier draft of the 2026 State Budget (RAPBN), which had proposed a 24.7 percent reduction from the 2025 allocation.

Despite the increase, the final figure remains significantly lower than the Rp919 trillion distributed to regional governments in 2025. The budget cuts have affected several provinces, not only through reduced TKD allocations but also through a decrease in revenue-sharing funds (DBH).

The most affected regions

Jakarta has been hit particularly hard by the reduction. Governor Pramono Anung confirmed that the capital city’s DBH allocation will be cut in 2026.

“Jakarta’s regional budget was initially set at Rp95 trillion, but with the nearly Rp15 trillion reduction in revenue-sharing funds, our final budget will stand at Rp79 trillion,” Pramono said at Jakarta City Hall on Monday, October 6, 2025.

However, the governor expressed little objection to the cut, saying the capital is in a better position than other regions.

“We believe Jakarta can still manage with such a reduction,” he added.

Budget absorption is key

Finance Minister Purbaya Yudhi Sadewa said regional governments could see higher transfer allocations in 2026 if they demonstrate efficient and transparent budget management. His statement followed widespread concern among local leaders that the cuts would strain regional finances.

“If budget absorption is effective, timely, and free from leakage, we can propose an increase to the DPR next year,” Purbaya said at the State Palace in Jakarta on Wednesday, October 8, 2025.

He stressed that the central government would not reduce funding for regions that perform well in managing their budgets.

“We will ensure decentralization continues, but with better policy implementation,” he said.

Purbaya added that without strong performance in budget utilization, it would be difficult to justify additional allocations, noting that the DPR is unlikely to approve higher transfers for underperforming regions.