It's Time To Limit Local Government Funds In Banking

JAKARTA - Minister of Finance Purbaya Yudhi Sadive again made a breakthrough. This time, Purbaya highlighted the high amount of funds deposited owned by local governments (Pemda) in banks. Unmitigated, until the end of August 2025, the total funds deposited by local governments in banks reached Rp233.11 trillion.

This amount increased by IDR 40.54 trillion compared to the same period in 2024 of IDR 192.57 trillion, as well as the largest since 2021. In the last five years, local government funds parked in banks tended to be high. In 2021 it was recorded at IDR 178.95 trillion, in 2022 it was IDR 2003.42 trillion, in 2023 it was IDR 201.31 trillion, in 2024 IDR 192.57 trillion, and in 2025 it jumped to IDR 233.11 trillion.

Based on data from the Ministry of Finance, there are 15 local governments with the largest deposits in banks as of September 2025, namely DKI Jakarta Province (IDR 14.6 trillion), East Java Province (IDR 6.8 trillion), Banjar Baru City (IDR 5.1 trillion), North Kalimantan Province (IDR 4.7 trillion), West Java Province (IDR 4.1 trillion), Bojonegoro Regency (IDR 3.6 trillion), West Kutai Regency (IDR 3.2 trillion), North Sumatra Province (IDR 3.1 trillion), Talaud Islands Regency (IDR 2.6 trillion), Mimika Regency (IDR 2.4 trillion), Badung Regency (IDR 2.2 trillion), Tanah Bumbu Regency (IDR 2.11 trillion), Bangka Belitung Province (IDR 2.10 trillion), Central Java Province (IDR 1.9 trillion) and Balangan Regency (IDR 1.8 trillion).

The high amount of funds deposited is inversely proportional to the realization of regional spending. As of September 24, 2025, the realization of local government spending was only recorded at IDR 656.40 trillion, equivalent to 46.86 percent of the ceiling. This phenomenon was surprising by the Minister of Finance Purbaya. This is because the lack of absorption of this budget is considered to have the potential to curb the rate of regional economic growth.

Therefore, he emphasized that the central government will evaluate the obstacles to regional government spending, even threatening to take over some of the funds so that they can be utilized more optimally. If it is really unemployed, we will move it. Let regional spending be more diligent," said Purbaya in Jakarta, Thursday, September 25.

He revealed that the main cause of the accumulation of funds was not a budget shortage, but a low speed of implementation of programs in the regions. "The central government has quickly distributed funds to the regions. Once again, (to) ensure that the money really works for the people," he added.

The Director General of Treasury of the Ministry of Finance, Astera Primanto Bhakti added, the slow absorption of local government spending is a classic problem that continues to repeat itself from year to year. He explained that planning and making Regional Revenue and Expenditure Budgets (APBD) is usually only carried out around September "October". After that, the contract was only carried out in April, and the realization of spending generally increased in the last three months before the end of the year.

According to him, this pattern makes regional cash funds accumulated in banks so that balances look large in the middle of the year. However, at the end of the year local government deposits usually drop significantly to the range of Rp95100 trillion.

"Most of the regional cash funds actually already have allocations, including for program payments or running contracts. The main challenge is to accelerate the shopping cycle so that cash balances don't appear to accumulate in the middle of the year," he said.

Regulations To Restrict Local Government Endament Funds

Minister of Finance Purbaya and his staff may be able to continue the ideas or discourse that was raised by the Minister of Finance in the era of President Susilo Bambang Yudhoyono, M Chatib Basri. In 2014, he revealed the government's plan to make special regulations to suppress the accumulation of idle local government funds that are unemployed in banking accounts.

According to him, limiting local government idle funds in banks is possible by limiting the maximum time of local government time deposits stored in banks. The maximum rule will at least limit excessive buildup. I haven't seen the technique but the idea is like that (limited to the maximum monthly). Don't let money settle in the bank and buy instruments, state debt securities and so on," continued Chatib.

Like Purbaya, Chatib also highlighted that the large amount of local government idle funds showed that many programs and development projects were not running. This is because the budget that should be used to finance development programs and projects is actually stored in banks. The first year from the central government to the local government is placed in BPD (Regional Development Bank), then stored back in SBI (Bank Indonesia certificate), back to the center, infrastructure is not built," he said.

Executive Director of the Regional Autonomy Implementation Monitoring Committee (KPPOD) Herman N Suparman emphasized that in order to overcome the classic problem of local government fund deposits in banks, structural reform is needed, it is not enough to depend on efforts, limiting local government funds in a future. He considered that the time limitation of time deposits would not be fair considering that there were several local governments that had very large APBDs while other areas were small.

He explained that it would be better if the government imposed a ratio limit between silpa and total APBD, where the maximum gap from each local government should be 2 percent of the total APBD. In addition, to reduce the amount of idle funds in banks, the central government can also ask local governments to report LKPD (local government financial reports) regularly every six months.

Thus, the central government, in this case the Ministry of Finance, will quickly find out which local governments store large amounts of funds in banks but the spending capacity is still low. There must be firmness. If you don't submit LKPD, then the DAU will not be given. So far, there are no sanctions, so there is no discipline," said Herman.

Community Interests Must Be Prioritized Instead Of Deposits In Banks

Meanwhile, the Minister of Home Affairs, Tito Karnavian, said that he had the same view as the Minister of Finance Purbaya Yudhi Sadive regarding regional funds. He emphasized that regional funds should not be deposited in banks and must be used immediately for the benefit of the community. "Our goal is the same, regional funds should not be deposited in banks, but will be spent immediately on the community," he said.

Regarding the difference in local government deposit data between the Ministry of Home Affairs and the Ministry of Finance, he ensured that there was no difference in principles but only technical differences in reporting methods. The Minister of Home Affairs explained that the difference of around Rp. 18 trillion between data released by the Ministry of Finance and the Ministry of Home Affairs was reasonable. Based on data from the Regional Government Information System (SIPD) as of October 2025, local government deposit funds were recorded at Rp. 215 trillion. Meanwhile, the data from Bank Indonesia (BI) quoted by the Minister of Finance showed that the figure was Rp. 233 trillion as of August 2025.

Tito considers that the two-month difference in reporting time explains the difference in numbers. It's very natural to reduce it. If August is IDR 233 trillion, then October IDR 215 trillion, meaning that IDR 18 trillion has been spent," he added.

The Minister of Finance of the Republic of Indonesia, Purbaya Yudhi Sadive. (Photo: Doc. Antara)

"It's okay"

"It's okay"

"It's okay"

"It's okay"

He again emphasized that the spirit between the Ministry of Finance and the Ministry of Home Affairs remains in line, namely both wanting to accelerate budget absorption and ensure regional funds provide real benefits to the community.

Member of Commission II of the DPR RI, Ahmad Doli Kurnia, hopes that the central and regional governments will sit down together and explain the issues related to the unabsorbed funds. He also questioned whether the problem was caused by administrative errors, management errors, or that there were problems in regional financial governance.

"This must be based between the central and regional governments. What is really going on? Has the budget not been absorbed so far because the regional head does not know, or there is mismanagement, or even actions that should not occur in the regions," he said.

This politician from the Golkar Party faction believes that the central government has been paying great attention to regional development, through transfer funds which amount to hundreds of trillions every year. Therefore, local governments should be able to manage the budget in a transparent and targeted manner so that the benefits can be directly felt by the community. "The point is how the central government provides a budget for local governments to accelerate development, the results of which are felt directly by the people," concluded Doli.