Indonesia’s Home Ministry has instructed regional administrations not to furlough government contract employees under the Public Service Employee (PPPK) scheme. Home Minister Tito Karnavian stated on July 9 at the Senayan legislative complex that local governments must prioritize budget efficiency and cut nonessential spending before seeking central government financial support.
Did You Know? Regional transfers in the 2026 state budget were reduced to Rp693 trillion, a decrease of approximately 20% from the Rp869 trillion allocated in 2025.
Tito Karnavian Mandates Budget Reviews Before Salary Support
Home Minister Tito Karnavian said regional administrations must eliminate nonessential expenditures, specifically citing travel, meetings, and catering, before claiming an inability to pay PPPK salaries. The central government will only intervene after regions exhaust these efficiency measures.
Tito stated that the government will identify regions with truly limited fiscal capacity. For those that implement efficiency measures, the ministry will propose to the Finance Minister that they be prioritized for the disbursement of undisbursed revenue-sharing funds (DBH).
Regional Fiscal Crisis and Furlough Threats
The directive follows several instances of local financial instability. The Tidore Islands administration in North Maluku recently announced plans to furlough thousands of PPPK employees, though it reversed the decision after worker protests.
In Aceh, approximately 3,000 PPPK employees have not received July salaries or their annual 13th-month bonus due to depleted provincial funds. Other regions face similar risks: East Nusa Tenggara previously considered cutting 9,000 contract positions, and West Sulawesi warned it could lay off over 2,000 PPPK employees by 2027 without financial improvement.
Expert Insight: The tension here lies in the conflict between central austerity and regional obligations. By tying DBH disbursements to efficiency audits, the central government is shifting the burden of proof to local administrations, which may struggle to maintain basic public services if payroll is the only remaining flexible budget item.
KPPOD Challenges Efficiency Prerequisites
Herman Suparman, executive director of the Regional Autonomy Watch (KPPOD), warned that many local governments have already spent the last year and a half tightening budgets. He told The Jakarta Post that there is “little left to cut.”
Suparman argued that the central government should not make budget efficiency a prerequisite for disbursing DBH, stating that these funds are a “regions’ right.” As a short-term solution, he suggested the central government increase transfers via a 2026 state budget revision, while urging regions to diversify income streams and improve tax collection long-term.
Impact of National Austerity Measures
Current financial strains follow austerity measures introduced by President Prabowo Subianto after his October 2024 inauguration. These measures, designed to fund key government programs, resulted in the lowest regional transfer allocation in nearly a decade.
Funding for the DBH program was cut by nearly 70%. Some regions are still awaiting DBH payments from 2023. Finance Minister Purbawa Yudhi Sadewa has pledged that these outstanding payments will be released in phases starting this month.
Frequently Asked Questions
What must regional governments do before receiving salary support?
According to Home Minister Tito Karnavian, regions must first review their budgets and eliminate nonessential spending on items such as catering, meetings, and travel.
Which regions have specifically reported PPPK salary or job issues?
Aceh reports 3,000 employees missing July salaries and bonuses; Tidore Islands recently proposed thousands of furloughs; East Nusa Tenggara considered cutting 9,000 positions; and West Sulawesi warned of 2,000 layoffs by 2027.
How much were regional transfers reduced in the 2026 budget?
Transfers were reduced to Rp693 trillion from Rp869 trillion in 2025, representing a decrease of approximately 20%.
Do you believe budget efficiency measures are sufficient to prevent public sector layoffs?