With the reduction of regional transfers in the 2026 Draft State Budget (RAPBN), all district governments (pemkab) are asked to be more creative in finding local revenue. On the expenditure side, district governments are also required to make efficiency, and spend on things that are more targeted.
This was the message given by President Prabowo Subianto and Minister of Home Affairs Tito Karnavian when delivering remarks at the Association of Indonesian Regency Governments (Apkasi) Autonomy Expo 2025, which took place at Nusantara Hall, Indonesia Convention Exhibition (ICE) BSD, Tangerang, Banten Province, on Thursday (28/8/2025).
"Efficiency, reduce official travel, reduce meetings, reduce seminars, reduce work visits, what are work visits for? The important thing is work, not work visits," the President said.
According to the Head of State, funds from efficiency results can be diverted to finance priority programs that directly touch people's lives. Namely, irrigation, health, education, and strengthening food security.
As previously reported, the central government cut the transfer budget to the regions in the 2026 Draft State Budget. The allocation will only be around Rp 650 trillion, a significant decrease compared to the current budget of Rp 864.1 trillion. This cut of around 24.8% makes local governments have to find ways to maintain their fiscal space.
Minister of Home Affairs Tito Karnavian admitted that district governments are still heavily dependent on transfers from the central government. He said that out of 419 districts in Indonesia, around 350 of them still depend on the central budget.
In response to fiscal challenges, Tito instructed the regents to make budget efficiency and allocate it to other programs that are more prosperous for the people. For example, Tito continued, reduce official travel expenditures. Meetings from 10 times enough to only twice as long as it is optimal.
Tito gave an example of Regent Bursah Zarnubi in Lahat Regency who managed to make budget efficiency up to Rp 462 billion. Then, the savings were allocated for irrigation development that can irrigate up to 80,000 hectares of land.
In addition, Tito encouraged the district government to be creative in finding other ways to get revenue. The goal is that districts do not always have to rely on the central budget. Tito gave the example of Badung Regency, whose budget posture is 90% derived from original revenue (PAD). This means that only 10% of its budget comes from the center.
One way that the district government can do this, continued Tito, is by cooperating with the Indonesian Chamber of Commerce and Industry (Kadin). Thus, the local government can optimize regional potential so that it can be processed into revenue.
"We know that not all regional heads have business instincts. So, invite the private sector to be involved in regional development. Invite Kadin to help empower the business world and the regional economy," said Tito.
Tria Dianti
In addition, Tito encouraged local governments to seize opportunities from national programs. For example, the Free Nutritious Meal Program (MBG) and the Merah-Putih Village Cooperative (KDMP). Local governments can play a role in uniting these programs.
"For example, the MBG program is supplied by the Merah Putih Village Cooperative. MBG runs and the cooperative can live. This model of cooperation is what is needed," said Tito.
Raising local taxes?
Chairman of the Association of Indonesian Regency Governments (Apkasi) Bursah Zarnubi acknowledged that this fiscal issue is a challenge that must be resolved by the regents. "Regents must strive for fiscal justice with independent financial sources and spend for the purpose of achieving people's welfare," said Bursah.
He added that currently there is a phenomenon of regents increasing the Land and Building Tax (PBB) as a shortcut to pursue regional income. This is enough to create dynamics and turmoil in the community.
According to him, to anticipate fiscal constraints, the regents can join hands and coordinate trade with other regions. For example, region A is abundant with rice harvests, so it can trade with region B which needs rice supplies.
"We estimate that trade between these districts could reach Rp 50 trillion. This is extraordinary, because it can encourage economic growth according to the President's ideals, which is 7%-8% in the next 3 years-4 years," said Bursah.
Central Tapanuli Regent Masinton Pasaribu also emphasized that he would not close the gap in financing his regional budget by increasing the Land and Building Tax (PBB). He argued that the economic conditions and purchasing power of the people of Central Tapanuli are currently still weak. "We have to make sure the people's economy is healthy first," said the PDI-P politician.
Instead, the Central Tapanuli Government provides incentives in the form of the elimination of administrative sanctions for Rural and Urban PBB (PBB P2). This policy is valid from August 14 to December 31, 2025, covering tax years 2021 to 2025. The incentive was stipulated through Regent Decree Number 1063/BPKPAD/2025 in the context of the 80th Anniversary of the Republic of Indonesia and the 80th anniversary of Central Tapanuli Regency.
Masinton said that this step is expected to ease the burden on the community while increasing tax compliance. The Central Tapanuli Government also opens access to non-cash PBB P2 payments to facilitate citizens, ranging from QRIS to various platforms such as Tokopedia, Gopay, Blibli, Indomaret, PosPay, and New Sumut Mobile from Bank Sumut.
To make up for the decline in the number of transfers from the central government, Masinton said that his party was optimizing the potential of local revenue. This step was taken by improving business administration, licensing, and exploring the potential of restaurants, plantations, and vegetable commodities in Central Tapanuli.
"For us, anyway, it's not about increasing the PBB, we are looking for potential revenue from other sectors," said Masinton.
"For us, anyway, it's not about increasing the PBB, we are looking for potential revenue from other sectors," said Masinton.
Meanwhile, Executive Director of the Committee for Monitoring the Implementation of Regional Autonomy (KPPOD) Herman Suparman assessed that the reduction in the transfer budget from the center has the potential to hit regions that have been very dependent on injections of funds from the central government.
"About 60%-70% of our regions, cities, and also provinces still rely on funds from the central government called transfers to the regions, or used to be called balancing funds," he told SUAR by telephone.
He added that this influx of funds makes the regional economy highly dependent on local government spending, which includes operational and capital expenditures.
Herman compares this situation to the central government's Rp 50.59 trillion budget efficiency at the start of 2025 - which has left regions in the lurch.
"The regions are already down like that, especially next year when there is a decline of 24.8%," he said.
