The policy comes in response to the partial reallocation of regional fiscal transfers (TKD) from the central government.
“We have given many awards to regional governments—those that have managed to control inflation, tackle stunting, and implement more efficient spending. All of that is recognized,” Tito said in a statement in Jakarta on Friday.
Tito explained that the Ministry of Home Affairs (Kemendagri) routinely acknowledges regional leaders who succeed in improving local economies and living standards.
With the upcoming shift in TKD allocations, regional governments are now expected to be more innovative in formulating fiscal policies to boost their own-source revenue (PAD).
However, he cautioned local governments against simply raising tax rates, as this could place an additional burden on citizens.
In the 2026 Draft State Budget (RAPBN), the central government allocated Rp650 trillion in transfers to the regions, down from Rp919 trillion in the 2025 budget. This decrease will be offset by other initiatives through ministries and agencies, totaling Rp1,300 trillion.
Tito emphasized that his ministry has coordinated with Finance Minister Sri Mulyani to prepare fiscal incentives for regions that adopt effective independent fiscal strategies.
“Every week, I read out the top 10 and bottom 10 performing regions, based on inflation and economic performance. This serves as a collective evaluation,” he added.
Tito also urged local leaders not to be discouraged by the fiscal transformation.
Success in navigating these changes, he said, would not only bring fiscal incentives but also political benefits in the form of greater public trust and higher electability ahead of upcoming regional elections (Pilkada).
“If a regional head performs well, they’ll gain popularity and electability—both of which are valuable assets in today’s era of direct elections,” he concluded.
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Translator: Fianda, Azis Kurmala
Editor: M Razi Rahman
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