TKD Reduced by 24.8 Percent, Economist Highlights Local Government Funds Idle in Banks

TKD Reduced by 24.8 Percent, Economist Highlights Local Government Funds Idle in Banks

JAKARTA, KOMPAS.com - Cutting the Transfer to Regions (TKD) budget is not considered a solution to the issue of many local governments (pemda) accumulating funds in banks.

"The solution is not to cut (TKD), but to improve the budget planning procedures and oversight," said Bhima Yudhistira, Executive Director of the Center of Economic and Law Studies, when contacted by Kompas.com on Friday (18/9/2026).

Reducing the TKD budget is seen as unfair to local governments.

KOMPAS.com/ AGUSTINUS RANGGA RESPATI Economist and Executive Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira Adhinegara, met in Jakarta, Wednesday (10/6/2026).

Especially if the budget cuts are redirected to central government priority programs such as Free Nutritious Meals (MBG) or the Red and White Village/Sub-District Cooperatives (KDKMP).

"If the budget is cut, local governments could argue that Prabowo’s priority programs like MBG and Kopdes are wasteful and have little impact," he added.

Bhima emphasized that as president, Prabowo should not view the problem of local governments hoarding funds in banks in such a narrow way.

There are many factors causing local governments to prefer keeping their money in banks rather than using it for development.

One such factor is that local governments are heavily regulated by the central government when carrying out development projects.

In fact, every region must allocate special funds (DAK) to implement central government programs.

This situation causes regional leaders to be reluctant in exercising their authority in carrying out development.

"The second factor is that contract officials fear being implicated in legal cases. This prolongs the bureaucracy of budget absorption," Bhima said.

Previously reported, Prabowo explained the reason the central government cut the national TKD budget in the 2026 State Revenue and Expenditure Budget (APBN) by as much as 24.8 percent.

The main factor is that many local government funds remain unused and pile up in banks.

Even though these funds are transferred by the central government to be used for development in the regions.

"Sometimes it’s strange, local governments don’t use the money. We have proof, it’s kept in banks, or there are conflicts between regents and DPRD. So, we have transferred the money but it is not being used," Prabowo said, as quoted from the 'President Prabowo Answers' program on Prabowo Subianto’s YouTube channel, Friday (18/9/2026).