Prabowo Subianto's Fiscal Recentralization

President Prabowo Subianto's administration is implementing a sweeping centralization of regional policies and budgets, a move critics argue violates the law and stems from a centralist mindset. The central government is cutting transfer funds to provinces by up to 25 percent and reallocating 58 percent of village funds from the 2026 State Budget to the President’s flagship programs. These initiatives, including the free nutritious meal project and the red-and-white cooperatives, are deemed neither urgent nor guaranteed to yield results by critics.

This drastic reduction of hundreds of trillions of rupiah, following a similar budget cut last year, has left local governments in dire straits. Many are struggling to repair damaged roads and pay government workers, with 79 regions reportedly facing fiscal difficulties. North Maluku, for example, can no longer afford to pay its employees, while other regions face stalled public construction work and disrupted public services. Villages are also unable to carry out development plans as village funds have been drastically reduced, leading to stalled infrastructure projects and struggling integrated service posts.

Adding to the strain, villages are being compelled to establish red-and-white cooperatives. Their village funds will be subject to deductions for at least six years to allow the managing entity, Agrinas Pangan Nusantara, to repay a Rp240 trillion debt. Villages face even steeper deductions in the second disbursement phase if they do not comply, effectively forcing their participation.

Prabowo has justified the budget cuts by claiming it is a better alternative to losing funds to corruption. However, critics contend that this view oversimplifies the issue. They argue that if the president's goal is to eradicate corruption, he should focus on establishing effective preventive systems and continuing crackdowns on corrupt officials. Furthermore, they point out that much of the corruption involving regional heads stems from bribery and extortion, not just direct theft of state funds.