Jakarta. The government plans to reclaim around Rp 100 trillion ($5.7 billion) in local government funds sitting unused in banks by year-end, Finance Minister Purbaya Yudhi Sadewa said Tuesday.

Purbaya said the funds could be withdrawn and transferred back to regional governments at the start of the following budget year, once the government has tested and improved its transfer system.

“The plan is to take the Rp 100 trillion,” Purbaya told reporters in Jakarta on Tuesday.

The government is currently overhauling the mechanism for transferring funds to local governments, aiming to ensure allocations are distributed more evenly throughout the year rather than prompting regions to build up large cash reserves.

“The funds should already be transferred from the central government on Jan. 2, so there should be no need for such a large cushion. But we haven’t tested the system yet, so I’m not ready to take it. Let it stay there for now while we test our system,” Purbaya said.

Purbaya said local governments have traditionally kept large amounts of money in banks toward the end of the year as a buffer for spending needs at the beginning of the next budget year.

“They used to worry that they wouldn’t have money in January, so they would keep a large cash reserve in December. But that is essentially unused money,” he said.

The allocation for transfers to local governments stands at Rp 693 trillion in 2026, down Rp 156 trillion from Rp 849 trillion in 2025. The allocation is planned to rise to Rp 735 trillion in 2027.

The government also wants to smooth out central government spending, which has historically been concentrated toward the end of the budget year. Purbaya said a better system should reduce the accumulation of unspent funds both at the regional and central levels.

“If our system works properly, there should be no such money. The same applies to the central government, there should be no budget surplus balance (SAL)” Purbaya said.

Purbaya said more evenly distributed government spending would help support economic growth throughout the year. The Rp 100 trillion currently sitting idle in regional accounts, he added, represents a burden on state financial management.

Under the planned mechanism, the government would reclaim the funds at the end of the year and transfer them back to local governments in January, allowing regions to maintain smaller cash buffers.

“We take it, then distribute it again in January so they won’t run short of funds. But they won’t need to build up such a large reserve. That Rp 100 trillion is what burdens me,” Purbaya said.

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