Executive Summary

Key insights and market outlook

Regional governments in Indonesia are struggling with low budget realization rates, with only 70.81% of Rp 1,414.88 trillion APBD spent by December 20, 2025. Experts attribute this to structural fiscal management issues rather than year-end technicalities. The Ministry of Finance reports that while regional revenue has reached 82.93% of target, expenditure remains sluggish, particularly in capital and goods/services spending.

Full Analysis

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Deep Dive Analysis

Indonesia's Regional Budget Realization Slows Amid Structural Fiscal Challenges

Low Expenditure Despite High Revenue Collection

Regional governments across Indonesia are facing challenges in executing their budgets, with the overall realization of the Regional Budget (APBD) 2025 standing at only Rp 1,001.93 trillion or 70.81% of the total budget as of December 20, 2025 ²

³. This slow spending is particularly concerning given that regional revenue collection has been more successful, reaching 82.93% of the target during the same period ³.

Structural Issues in Fiscal Management

The slow budget realization is not merely a year-end technical issue but is seen as a reflection of deeper structural problems in regional fiscal management ²

. Yusuf Rendy Manilet, an economist from the Center of Reform on Economics (CORE), highlights that the pattern of delayed spending by regional governments indicates weaknesses in planning and budget execution.

Expenditure Patterns and Potential SiLPA

The composition of the realized expenditure shows that the largest portion goes to employee expenditures (around 40%), followed by goods and services (28.95%), and capital expenditures (10.7%) ³

. With significant unspent funds (Rp 412.95 trillion remaining), there are concerns about the potential for a large Surplus Budget (SiLPA) at the end of the fiscal year ².

Government Response

The Ministry of Finance has emphasized that the slow realization is not intended to artificially control the fiscal deficit but rather to focus on quality spending ¹

. Director General of Budget Luky Alfirman stated that the government remains dynamic in responding to fiscal developments, particularly in the final weeks of December 2025.

Implications and Future Outlook

The current trend in regional budget realization suggests that regional governments need to improve their fiscal management capabilities. The Ministry of Finance will likely continue to monitor the situation closely and may implement measures to address these structural issues.

References