Agung Dharma Putra, Jakarta – Finance Minister Purbaya Yudhi Sadewa recently admitted that rampant corruption in local governments had caused the massive cut of around Rp 227 trillion (approximately $13.6 billion) in next year's regional budgets.

Every year, the central government will allocate a sum of money to the sub-national governments, better known as regional transfers (TKD). According to the 2026 draft state budget, local governments will only get Rp 693 trillion in transfers next year. This marks a 24.6 percent drop from the Rp 919.9 trillion that they got in 2025.

"They [regional governments] must learn their lesson and improve their ways of using the budget. We must avoid mass arrests. If they can perform well [in the budget use], I can persuade my superiors to increase it [the local transfers]," Purbaya told reporters in Surabaya on Thursday.

However, Purbaya said that the transfer cuts did not mean governments were receiving less funds for their regional development. The money meant for programs aimed at regional development rose from Rp 900 trillion to Rp 1.3 quadrillion. "So the total money flowing into the regions has not decreased. It's just that we have reorganized the channels so the distribution will be more efficient and targeted," Purbaya said.

The Finance Ministry reported that the disbursements for local transfers already reached Rp 571.5 trillion as of late August. This is equivalent to around 62.1 percent of what the government had allocated for this year.

Source: https://jakartaglobe.id/business/mass-corruption-causes-136-billion-regional-transfer-cuts-purbay