From Food to Roads, Regional Budget Cuts Disrupt Essential Spending

JAKARTA, KOMPAS – Budget cuts at the regional level have also targeted essential spending such as food and road and irrigation infrastructure development. Regional governments must be smart in managing the remaining budget so that efficiency directives from the center do not disrupt important programs that are directly related to the people.

According to President Prabowo Subianto's instructions, budget cuts in the regions target two sources at once. First, Transfer to Regions (TKD) which is an allocation of funds from the central government to the regions. Second, the Regional Revenue and Expenditure Budget (APBD) which is the authority of the regions.

Referring to the Decree of the Minister of Finance (KMK) Number 29 of 2025 which was recently stipulated by the Minister of Finance Sri Mulyani on February 3, 2025, there are six TKD posts affected by efficiency with a total value of IDR 50.5 trillion.

The six items are the Underpayment of Revenue Sharing Funds (DBH) which was cut by IDR 13.9 trillion or 50 percent, the General Allocation Fund (DAU) which was cut by IDR 15.6 trillion or 3.5 percent, and the Physical Special Allocation Fund (DAK Fisik) which was cut by IDR 18.3 trillion or 49.5 percent.

In addition, there is also the Special Autonomy Fund (Dana Otsus) which was cut by IDR 509.4 billion or 3.5 percent, the Special Region of Yogyakarta Fund which was cut by IDR 200 billion or 16.6 percent, and the Village Fund which was cut by IDR 2 trillion or 2.8 percent.

The budget cuts for the TKD post also targeted essential spending such as food and infrastructure. This can be seen from the cuts in Physical DAK which were directed to cut the allocation of funds in the agricultural food sector by Rp 675.3 billion, and in the aquatic food sector by Rp 1.3 trillion.

In addition, the reduction in Physical DAK which targets fund allocation in the connectivity or infrastructure sector such as roads is IDR 14.5 trillion, and in the irrigation sector is IDR 1.72 trillion.

There is also a cut in the allocation of funds sourced from the DAU post for Public Works (PU) by Rp 15.6 trillion. The DAU for the PU sector is usually specifically used to finance infrastructure development in the regions.

Director of General Transfer Funds at the Directorate General of Fiscal Balance of the Ministry of Finance, Sandy Firdaus, confirmed that the cuts in these items will definitely have a direct impact on regional budget capacity in 2025.

"Indeed, in the end, the regional government must refocus the budget, which can be shifted from savings such as official travel and seminars to more productive spending, including spending that was originally supposed to be financed through DAU," said Sandy in an online discussion "APBD Efficiency for More Productive Spending", Tuesday (4/2/2025).

Director of Special Transfer Funds Purwanto added that although capital expenditure for food and infrastructure was affected by the Physical DAK cuts, there were still a number of other important spending items that were not affected by efficiency. For example, the fields of education, health, and drinking water and sanitation.

"So, the regional government is now better off focusing on immediately realizing spending from the Physical DAK post that is not reserved (cut). There is still a budget for education, health, drinking water, and sanitation," he said.

For the DAK Physical food and infrastructure posts that have been cut, Purwanto hopes that there will be other central government policies in the near future that can compensate for the development programs that have now been forced to stop due to efficiency directives from the center.

"We hope that there will be government policies that will benefit local communities in other or similar forms. For example, if there is a road that should be built using Physical DAK, but it is delayed due to reserves (efficiency). We hope that there will be road construction for the people, even though it is not carried out by the local government," he said.

Contacted separately, Executive Director of the Regional Autonomy Implementation Monitoring Committee (KPPOD) Arman Suparman regretted the significant budget cuts in productive TKD posts. Before taking efficiency policies, the central government should have invited regional government representatives for discussions first.

"This certainly has a big impact on the regions, because from our records, regional governments have so far relied heavily on capital expenditure from Physical DAK to build roads, irrigation, and so on," said Armand.

Moreover, the results of efficiency on the productive budget in the region will be used to increase the budget for the central government's priority programs, such as Free Nutritious Meals (MBG), not to be diverted to other priority programs in the region concerned. "This is like turning your back on regional autonomy," he said.

Executive Director of the Association of Indonesian City Governments (APEKSI) Alwis Rustam added that this is a momentum for local governments to strengthen their financial management by optimizing external funding sources, without relying on the central government.

He gave an example, regional governments in the future can optimize the use of regional assets and financing patterns of government and business entity cooperation (KPBU) to fund regional infrastructure development, including by utilizing regional bonds and loans, sukuk, and other financing schemes.

"The problem is that (associations) of local governments are often only used as a mouthpiece for the socialization of central policies, not as a reference and place to discuss various policies that should uphold decentralization. At least, consider the point of view and aspirations of the region, so that the regulation is right on target and down to earth," said Alwis.