JAKARTA: The Home Ministry has instructed regional administrations not to furlough government contract employees (PPPK) despite mounting fiscal pressure, urging them instead to slash nonessential spending and reprioritise budgets before seeking central government assistance.
Home Minister Tito Karnavian ensured that the government would help regions struggling to pay employees under the PPPK scheme, but only after they had exhausted savings from budget efficiencies, including cuts to travel, meetings and catering.
“We will identify regions that truly have limited fiscal capacity. But first, we ask the regions to implement budget efficiency measures,” he told journalists at the Senayan legislative complex in Central Jakarta on Thursday (July 9).
Tito urged regional leaders to thoroughly review their budgets before concluding they lacked fiscal capacity to pay PPPK salaries.
If some regions remain under financial strain after implementing the cuts, the ministry will assess whether they are eligible to receive an undisbursed revenue-sharing fund (DBH).
“If they are, we will propose to the Finance Minister that those regions be prioritized for the DBH disbursement so they can pay PPPK salaries as soon as possible,” the minister added, as quoted by Kompas.com.
The remarks came after the Tidore Islands administration in North Maluku announced earlier this week that it would furlough thousands of PPPK employees because of budget constraints, only to reverse the decision following protests from affected workers.
Similar fiscal pressures have emerged elsewhere. In Aceh, around 3,000 PPPK employees have yet to receive their July salaries and annual 13th-month bonus after the provincial administration ran out of funds.
Earlier this year, East Nusa Tenggara considered cutting around 9,000 contract positions to reduce spending, while West Sulawesi has warned it may have to lay off more than 2,000 PPPK employees by 2027 if its fiscal situation does not improve.
Little left to trim
The Regional Autonomy Watch (KPPOD), an independent think tank focusing on regional governance and public policy, warned that local administrations have little room left to tighten their budgets after years of spending cuts.
KPPOD executive director Herman Suparman said reductions in regional transfers from central government had placed increasing pressure on local finances, making it difficult for administrations to sustain public services while meeting payroll obligations.
“I think regional administrations have been implementing [efficiency measures] for the past one and a half years, to the point that there is little left to cut,” Herman told The Jakarta Post on Friday.
He further argued that the only viable short-term solution would be for the central government to increase transfers through a revision to the 2026 state budget.
Over the longer term, Herman said regional administrations would need to strengthen their own-source revenue by improving tax and levy collection while diversifying income streams to reduce their dependence on transfers from Jakarta.
He also questioned the ministry's plan to link DBH disbursement to budget efficiency.
“While we support the government’s efforts to encourage efficiency among regional administrations, it should not make it a prerequisite for disbursing DBH,” Herman said. “It is regions’ right and there should be no debate about it.”
The fiscal strain follows sweeping austerity measures introduced by President Prabowo Subianto shortly after taking office in October 2024 to fund his flagship programs, reducing transfers to regional administrations over the past 18 months.
Regional transfers were slashed to Rp 693 trillion (US$42.5 billion) in the 2026 state budget, down about 20 per cent from the Rp 869 trillion allocated in 2025 and the lowest level in nearly a decade.
The allocation for DBH, which forms part of regional transfer and is calculated based on state revenue, was also cut by nearly 70 per cent in this year’s budget, drawing protests from regional leaders.
Meanwhile, the disbursement of some DBH allocations dating back to 2023 has yet to be completed in several regions.
Finance Minister Purbawa Yudhi Sadewa has pledged that the payments will begin to be released in stages starting this month. - The Jakarta Post/ANN
