The committee agreed to set the 2027 TKD ratio at between 2.55 percent and 2.79 percent of the gross domestic product (GDP).
“The 2027 TKD policy is aimed at encouraging effective and efficient regional spending to accelerate economic growth and welfare in the regions,” Deputy Chair of the committee Wihadi Wiyanto said during a plenary session here on Thursday.
He emphasized that the funds do not only serve to fulfill local governments’ financing needs, but also act as a crucial instrument to strengthen the quality of fiscal decentralization.
The fund transfers are designed to bridge fiscal inequalities between regions, enhance the quality of local spending, and accelerate the achievement of national development targets.
Wihadi said the allocations should closely reflect actual regional needs. One proposed measure is to refine the General Allocation Fund (DAU) formula so that it better aligns with the funding required to meet Minimum Service Standards (SPM).
He added that the formula should also take into account inflation, economic growth, rising local administrative costs, and basic public service needs.
In addition to improving the allocation formula, the committee stressed the importance of strengthening fund governance through a performance-based approach.
To that end, it proposed introducing a reward-and-punishment mechanism for the disbursement of special autonomy (Otsus) funds to ensure accountable budget utilization and measurable outcomes.
“Implementing performance-based rewards and punishments linked to budget absorption and output achievements in future disbursements of special autonomy funds will support our macrodevelopment targets, such as reducing extreme poverty and stunting,” Wihadi said.
The policy directions will be incorporated into the Financial Note of the 2027 State Budget Draft.
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Translator: Imamatul Silfia, Uyu Liman
Editor: M Razi Rahman
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