The cuts to Regional Transfer Funds (TKD) in 2026, combined with the strengthening of top-down national programs, have triggered concerns over the weakening of regional autonomy. After being reduced in 2025, TKD funds faced another significant cut in 2026, dropping to 693 trillion rupiah 24.7% decrease compared to the previous year’s 864 trillion rupiah.
Amidst fiscal pressure and the increasing burden of implementing national programs, local governments are seen as losing the room to determine their own development priorities and public services. Several regions are also facing delayed disbursements due to late transfers from the central government. On the other hand, regions are mandated to support various national priority programs, further limiting their fiscal space.
“Regions are required to fund many central programs, such as people’s schools (sekolah rakyat), the Red and White Village Cooperatives (KDMP), and Free Nutritious Meals (MBG),” stated Fitria, Executive Director of PATTIRO, during the virtual Local Governance Forum titled “TKD Cuts and Top-Down Programs: Is it a Move Toward Recentralization?” held on Thursday (March 5, 2026).
The Vice Mayor of Surakarta, Astrid Widayani, noted that the implementation of various national policies still requires institutional and fiscal support from local governments. “The success of the MBG Program in Solo highly depends on local-level service capacity,” Astrid said. She explained that implementation still faces several challenges, including food quality and variety, school distribution, kitchen readiness, and the need for public communication.
Shifting Central-Regional Relations
Changes in Central-Regional Relations The issue of central-regional relations is not only fiscal but also concerns the political and institutional design of decentralization in Indonesia.
Irfan Ridwan Maksum, a Professor of Administrative Science at the University of Indonesia, assessed that regional autonomy in Indonesia has been more administrative than political. “The dominance of national political parties in local systems, preventive regulations from the central government, and the presence of various vertical ministerial institutions in regions have increasingly restricted the autonomy of local governments,” Irfan explained.
Furthermore, Law Number 1 of 2022 on Financial Relations between the Central Government and Regional Governments (UU HKPD) is seen as potentially driving a trend toward centralization in fiscal relations. Following the enactment of the UU HKPD, the central government has greater power to determine the boundaries of authority and the institutional structure of regional governments.
Therefore, according to Irfan, regulations governing regional financial management need to be reformed to provide more flexibility. He argued that the contents of Regional Regulations (Perda) on the regional budget (APBD) should not be regulated in such granular detail down to specific expenditure accounts. “The APBD Perda should be drafted more broadly (global) so that local governments have the flexibility to adjust budget usage according to evolving needs,” he said.
This trend toward recentralization is also reflected in the practice of budget earmarking. Alamsyah Saragih, a public information transparency observer and former member of the Indonesian Ombudsman (2016–2020), assessed that such practices demonstrate a lack of trust from the central government in the regions’ ability to manage their autonomy.
Ironically, this shift toward recentralization has not been met with significant resistance. Both local governments and the public have yet to show a strong response to the tightening fiscal control by the central government. “This raises concerns that local governments may lose their relevance in the eyes of the public if they cannot visibly demonstrate their role in providing public services,” Alamsyah added.
Maintaining Regional Autonomy
The challenges in implementing regional autonomy, the solution is not to claw back authority to the center. Instead, what is needed is the strengthening of fiscal capacity, flexibility in budget management, and an improved design of central-regional fiscal relations. This would allow local governments to optimally fulfill their roles in providing public services and driving regional development.
Strengthening the synergy between central and local governments is key to ensuring that national policies do not shrink regional fiscal space, but rather bolster the capacity of local governments to improve the quality of public services and community welfare.
