TKD Cut: Minister of Home Affairs Urges Local Govts to Boost PAD

JAKARTA, DDTCNews - Minister of Home Affairs, Tito Karnavian, has called on local governments to be more creative in increasing local own-source revenue (pendapatan asli daerah/PAD in Indonesian).

Tito highlighted the persistently high fiscal dependency of local governments on the central government, which has caused the implementation of local government programmes to also depend on transfer funds. Meanwhile, this year the government has cut the allocation of transfers to regions (transfer ke daerah/TKD in Indonesian).

"If we were to rely solely on this budget (central government transfer funds), it would be very difficult," he said, as quoted on Friday (10/4/2026).

Tito noted that many regions still have a smaller proportion of PAD compared with transfer funds from the central government. This situation is compounded by the high level of employee expenditure within local government budgets (anggaran penerimaan dan belanja daerah/APBD in Indonesian).

In a number of regions, employee expenditure even exceeds 50% of the total budget, leaving very limited fiscal space for construction and development.

He argued that the mindset of local government officials needs to change, as bureaucracies tend to focus solely on spending without considering efforts to increase revenue. He therefore encouraged regional heads to adopt an entrepreneurial mindset in managing local finances.

"The basic principle is that revenue must exceed expenditure, not the other way around," he said.

Tito went on to outline a number of measures that regions can undertake in managing their budgets, including increasing PAD. First, improving expenditure efficiency, particularly operational spending such as official travel, meetings and non-priority activities.

Second, exploring new revenue sources without burdening lower-income communities.

He also encouraged local governments to stimulate the private sector through investment facilitation and easier business permits. One measure that can be taken is establishing public service malls (mal pelayanan publik/MPP in Indonesian) to expedite the business permit process.

Regional heads are also advised to engage organisations operating in the business sector to invigorate the private sector.

“There is Kadin, there is Apindo; invite them for discussions to stimulate the private sector. Investment does not have to come from abroad; it can be domestic, it can be local," he added.

For information, the government in the 2026 state budget has allocated transfers to regions amounting to only IDR692.99 trillion. This figure represents a decline of 24.67% compared with the 2025 state budget of IDR919.9 trillion. (dik)