Strengthened regional spending, TKD 2027 has the potential to reach IDR 810 trillion

JAKARTA, investor.id – The government plans a transfer allocation to regions (TKD) of between IDR 710 trillion and IDR 810 trillion in 2027. This figure is higher than the TKD allocation in 2026 which was IDR 693 trillion. TKD aims to accelerate development and economic growth in the region and create equitable and just development.

“The indicative TKD ceiling in 2027 is expected to be between IDR 710 trillion and IDR 810 trillion, influenced by alignment with the government’s strategic policies, prospects for state revenue distributed over the previous year, budgetary requirements for basic regional public services, as well as the state’s financial capacity,” quoted Thursday (28/5/2026) in the macroeconomic framework document 2027 on the main principles of fiscal policy (KEM PPKF).

The TKD management strategy involves strengthening the synergy of central and regional spending, performance-based TKD distribution policies for several types of TKD, strengthening APIP in the supervision and improving the quality of TKD distribution. The allocation and use of TKD is expected to support national priority programs and realize national development plans, especially supporting the Golden Indonesia Vision 2045.

ADVERTISEMENT

The general policy direction of the TKD in 2027 is to increase synergy and harmonization of central and regional spending through the use of targeted, measurable, accountable and transparent TKDs; support regional competitiveness through quality spending, synergies with innovative financing and strengthening local tax power; increase the effectiveness of TKD’s role in supporting PKPN, particularly education, health, Red and White village/sub-district cooperatives and food sovereignty; and strengthen synergies in the use of TKD and regional taxes and regional payments (PDRD) to equalize the quality of public services in the regions.

Earlier, Deputy Finance Minister Juda Agung said there were three challenges to boost the regional economy. The first is to encourage regional economic diversification. If we consider all growing regions spatially, the problem is that not all regions have the same resilience. There are still regional governments whose economic development depends on natural resources.

“A number of regions are very dependent on extractive or mining sectors and these commodities tend to be vulnerable to price fluctuations. Therefore, regional economic diversification and innovation are essential,” Judah said.

Second, the quality of regional spending is not yet optimal, which is why regional spending must be directed towards more productive programs that provide an impetus to the economy. In this case, the share of expenditure on personnel and goods dominates with an average of around 70%. At the same time, capital expenditures are relatively limited.

“Apart from this, regional expenditures are often low at the beginning of the year and only increase at the end of the year. This reduces the driving force of the APBD (Regional Revenue and Expenditure Budget) on the local economy,” Judah said.

Third, limited fiscal capacity, as evidenced by the heavy dependence of regional governments (Pemda), which remain very dependent on the central government. Considering that the local original income (PAD) is still very limited. This condition has a direct impact on the implementation of regional strategic projects which remain slowed down.

“The absorption capacity of regional budgets is often not optimal either. Transfer funds are not in line with objectives and are absorbed slowly, due to capacity and procurement procedures being relatively long. Of course, this ends up reducing economic stimulation at the local level,” Judah explained.

Editor: Christian Arnold