Minister of Home Affairs, Tito Karnavian, has shed light on the compelling factors contributing to the colossal sum of trillions of rupiah belonging to regional governments (Pemda) remaining idle in banks. This explanation comes as scrutiny intensifies over local financial management.
Karnavian revealed that a staggering Rp 203 trillion in total regional government savings is currently held in banks. This substantial figure represents the combined deposits from all provincial, regency, and city administrations across Indonesia, highlighting a significant pool of unspent public funds.
The issue gained prominence after President Prabowo Subianto directly questioned why a substantial amount of regional funds remained deposited in banks. “He (President Prabowo Subianto) asked why there are still regions that keep funds in banks,” Tito stated following a limited cabinet meeting at the Merdeka Palace in Jakarta on Monday, November 24.
The former National Police Chief (2016-2019) elaborated to President Prabowo that the transition period for newly appointed regional heads is a primary catalyst for the delayed disbursement of budgets by many local administrations. A majority of these new leaders, inaugurated on February 20, are still in the process of structuring their governments, including appointing heads of departments, regional secretaries, and other key officials. This organizational phase inevitably leads to a slowdown in budget allocation and expenditure.
Another critical factor, Karnavian explained, is the regional governments’ meticulous preparation for year-end contract payments. Many local projects are typically paid only upon their successful completion. This practice compels regional administrations to retain a portion of their budget, ensuring sufficient funds are available when payment deadlines arrive towards the end of the year.
Furthermore, the former Head of the National Counter-Terrorism Agency (BNPT) in 2016 underscored the necessity for regional governments to independently prepare budgets for civil servant salaries and operational costs for January. Unlike the central government, ministries, and agencies—whose payments are managed by the Ministry of Finance—regional administrations bear the direct responsibility of funding these essential expenses. This financial autonomy necessitates that regional governments hold onto a certain amount of cash in their accounts to prevent any potential shortages.
“This differs from the central government, ministries, and agencies, which are paid by the Ministry of Finance. For regional governments, it’s not like that; they pay themselves,” Tito clarified. He further emphasized the challenges faced by local administrations, stating, “While there are transfer funds from the central government, regional governments must also prepare. If central transfer funds arrive late, they have to cover it themselves, as salaries cannot be postponed.”
Summary
Minister of Home Affairs, Tito Karnavian, explained why Rp 203 trillion in regional government funds remains idle in banks, an issue questioned by President Prabowo Subianto. A primary reason is the transition period for newly appointed regional heads, inaugurated in February, who are still structuring their governments, causing delays in budget allocation.
Regional administrations also retain funds for meticulous year-end contract payments, as many projects are typically paid upon completion. Additionally, they must independently prepare budgets for January’s civil servant salaries and operational costs, necessitating cash reserves to cover these essential expenses if central transfer funds are late.
