“The reallocation is not a careless reduction. It should serve as a reminder for regional governments to improve fiscal discipline and focus on priority programs that directly benefit the people,” Karnavian said in a written statement.
He said the central government would assist regions facing fiscal strain due to the reallocation, provided they show commitment to better budget management and more efficient spending.
Karnavian added that he would coordinate with Finance Minister Purbaya Yudhi Sadewa to monitor regional fiscal transfers.
Finance Minister Sadewa also called on regional leaders to improve expenditure management to ensure that fiscal transfers effectively fund local development.
“Everything depends on regional leaders,” he said after meeting members of the National Provincial Governments Association (APPSI).
Sadewa noted that regional transfers in the 2026 state budget would remain at Rp1,300 trillion (US$78.5 billion), though a portion will be redirected to ministries for targeted regional spending.
Related news: Govt explains regional budget cuts, urges better fiscal alignment
The Finance Ministry, he added, would continue monitoring budget realization across regions through year-end to ensure accurate and effective disbursal.
Meanwhile, political analyst Efriza of the Citra Institute said cooperation between the Home and Finance ministries would be key to maintaining fiscal stability after the reallocation.
He called the policy a “momentum for regional fiscal reform.”
While the Home Ministry strengthens regional oversight, the Finance Ministry will ensure consistent fiscal discipline and accountability at all levels, Efriza said.
“This policy does not mean the central government is shirking its duty. It shows that Karnavian and Purbaya are guiding regional administrations to prevent financial decline," he added.
The reallocation also challenges local leaders to explore untapped revenue sources without burdening residents, while preserving political stability and public services, Efriza said.
Related news: Regional efficiency key to addressing fiscal transfer dynamics
Translator: Fianda Sjofjan R, Nabil Ihsan
Editor: Rahmad Nasution
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