Indonesia’s Ministry of Finance is calling on regional governments to expedite budget disbursement to stimulate local economies and reduce idle cash reserves. With over Rp233 trillion parked in banks as of August 2025, the unspent funds represent a missed opportunity for economic activation. As fiscal cycles lag behind real-time needs, reforming spending efficiency becomes a cornerstone of regional development.
Key Facts & Background
- As of August 31, 2025, regional government funds held in banks reached Rp233.11 trillion—the highest level since 2021.
- Historical data shows idle funds typically range between Rp178 trillion and Rp203 trillion.
- The accumulation is largely attributed to delays in budget execution, stemming from planning and procurement cycles.
- Budget designs are typically finalized in September–October, with procurement and contracting starting months later.
- Spending tends to accelerate only in the final quarter of the fiscal year, leaving transferred funds idle in regional development banks (BPDs).
- At year-end, idle funds typically decline to Rp95–100 trillion, but some regions still struggle to optimize spending.
- The Ministry of Finance, through Director General of Treasury Astera Primanto Bhakti, emphasized the need for faster disbursement to improve cash flow and economic impact.
- Regional distribution of idle funds as of August 2025:
- Java (119 regions): Rp84.77 trillion (36.37%)
- Kalimantan (61 regions): Rp51.34 trillion (22.03%)
- Sumatra (164 regions): Rp43.63 trillion (18.71%)
- Sulawesi (87 regions): Rp19.27 trillion (8.27%)
- Maluku & Papua (67 regions): Rp17.34 trillion (7.44%)
- Bali & Nusa Tenggara (44 regions): Rp16.75 trillion (7.19%)
Strategic Insights
The persistent buildup of idle regional funds in Indonesia’s banking system reflects a structural inefficiency in fiscal execution that undermines the potential of decentralized economic stimulus. While the transfer of funds from the central government is timely, the lag in procurement and contracting processes delays their impact on local development. This disconnect between budget allocation and real-world spending weakens the multiplier effect of public finance, especially in regions where infrastructure, social services, and employment generation are urgently needed.
Accelerating regional spending is not merely a technical adjustment—it is a strategic imperative. When funds remain dormant, they fail to circulate through local economies, suppressing demand, slowing job creation, and stalling growth. In contrast, timely disbursement can catalyze construction projects, SME support, and public service delivery, all of which contribute to inclusive and sustainable development. The Ministry’s call for reform signals a shift toward performance-based fiscal governance, where impact and timeliness are as critical as compliance.
Moreover, the regional disparities in idle fund accumulation suggest varying levels of administrative capacity and fiscal agility. Java’s dominance in idle funds may reflect its larger budget size, but it also highlights the need for tailored interventions across provinces. Digital budgeting tools, streamlined procurement systems, and capacity-building for local officials could help bridge the execution gap. Transparency and accountability mechanisms must also be strengthened to ensure that accelerated spending translates into tangible outcomes.