Indonesian regional fiscal transfer disputes

Indonesian regional leaders and legislators have raised concerns regarding the distribution of Revenue Sharing Funds (DBH) and a projected 24.7 percent decrease in Central Government Transfers (TKD) for 2026. Specifically, officials in Central Sulawesi noted a discrepancy where the province receives less than one percent of its mining tax contributions back in DBH. In Siak Regency, Riau, local officials reported significant unpaid DBH debts from 2023 and 2024, which has forced the postponement of infrastructure projects.

To address fiscal management challenges, the Ministry of Finance is drafting a Ministerial Regulation (PMK) to ensure local governments meet mandatory Village Fund Allocations (ADD). Under Government Regulation Number 16 of 2026, regencies and cities must budget at least 10 percent of their regional transfer funds (TKD)—derived from General Allocation Funds (DAU) and DBH—for village needs every fiscal year.

The proposed regulation allows the central government to delay or cut DAU and DBH to ensure compliance, though the calculation excludes certain components such as tobacco excise revenue sharing and specific natural resource revenue sharing. The central government intends to distribute the resulting adjusted funds on a monthly basis, with priority given to fixed income payments.