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Indonesia Moves to Reform Local Government Salaries and Funding
Indonesia is preparing a major overhaul of local‑government finance. Minister of Home Affairs Tito Karnavian said the 2000 regulation on regional head salaries (PP No. 109/2000) – unchanged for 26 years – will be revised to tie remuneration to performance assessments by BPKP, PANRB, the ministry and to each region’s own revenue (PAD). The revision will also introduce performance‑based rewards and punishments for heads and deputies.
Commission II of the DPR is pushing a parallel priority: to ensure the payment of Pegawai Pemerintah dengan Perjanjian Kerja (PPPK) salaries from regional budgets (APBD) and to keep the current employee‑spending ceiling flexible, allowing a relaxation above 30 % for 2027. The government plans to use a top‑up from the General Allocation Fund (DAU) for regions that lack sufficient Dana Bagi Hasil (DBH) to meet PPPK obligations.
Data show a net DBH shortfall of about Rp 70 trillion – roughly Rp 43 trillion from tax DBH and Rp 40 trillion from natural‑resource DBH, offset by an over‑payment of Rp 13 trillion – affecting 31 provinces, 317 regencies and 83 cities. The shortfall is seen as a key barrier to paying PPPK salaries and to funding local development.
Economists warn that local‑government bond issuance should be limited to productive projects such as transport, water, hospitals and other infrastructure, rather than covering routine spending, to avoid adding fiscal risk.
Entities
Bappenas · Commission II of the DPR · DBH (Revenue Sharing Fund) · Dana Bagi Hasil (DBH) · Financial and Development Supervision Agency (BPKP) · Indonesia · Indonesia Ministry of Home Affairs · Ministry of Finance (Indonesia) · Ministry of Home Affairs (Indonesia) · PPPK (Contract Civil Servants) · Pad (Pendapatan Asli Daerah) · Padang (PAD)
Claims
What the coverage asserts, and how many sources carry each claim.
- [● 4 SOURCES] The revised salaries for regional heads will be linked to performance assessments by BPKP, PANRB and the Ministry of Home Affairs and to each region’s own revenue (PAD). news.harianjogja.com · www.riliskalimantan.com · www.cnbcindonesia.com · gerindra.id
- [● 2 SOURCES] Improvements in regional revenue (PAD) are expected to expand fiscal capacity and public service delivery under the revised salary framework. news.harianjogja.com · www.riliskalimantan.com
- [● 3 SOURCES] The DBH shortfall consists of roughly Rp 43 trillion from tax DBH and Rp 40 trillion from natural‑resource DBH, offset by an over‑payment of Rp 13 trillion. www.cnbcindonesia.com · www.liputan6.com · katadata.co.id
- [● 2 SOURCES] The government will introduce a top‑up mechanism from the General Allocation Fund (DAU) for regions lacking sufficient DBH to help them pay PPPK salaries. www.cnbcindonesia.com · katadata.co.id
- [● 2 SOURCES] The 2000 regulation on the financial rights of regional heads (PP No. 109/2000) has not been revised for 26 years. news.harianjogja.com · www.riliskalimantan.com
- [● 2 SOURCES] A cross‑ministerial team including the Finance Ministry and Bappenas will be formed to revise the regional head salary regulation. news.harianjogja.com · www.riliskalimantan.com
- [○ 1 SOURCE] The national revenue‑sharing system (DBH) has a net shortfall of about Rp 70 trillion, affecting 31 provinces, 317 regencies and 83 cities. www.cnbcindonesia.com
- [○ 1 SOURCE] Addressing the DBH shortfall is intended to enable local governments to settle PPPK salary obligations. www.cnbcindonesia.com
- [○ 1 SOURCE] Demak Regency will extend all PPPK contracts and has prepared a budget for PPPK salaries in 2026 and 2027. jateng.jpnn.com
- [DISPUTED] PPPK salaries remain the responsibility of regional APBD and are not covered by the national budget (APBN). katadata.co.id
- [○ 1 SOURCE] Commission II DPR supports relaxing the employee‑spending ceiling above 30 % for fiscal year 2027. halosemarang.id
- [● 3 SOURCES] Proposed remuneration reform for regional heads includes performance‑based rewards and punishments. gerindra.id · www.liputan6.com · mediaindonesia.com