Joint Circular of 3 Ministers – Explanation of PMK Number 81 of 2025

The Joint Circular of 3 Ministers—an explanation of PMK Number 81 of 2025—represents a significant milestone in Indonesia’s Village Fund management policy. This Joint Circular (SEB) was issued by three central ministries: the Minister of Villages and Disadvantaged Regions Development, the Minister of Finance, and the Minister of Home Affairs, each holding a key role in village guidance, budgeting, and governance.

The document is addressed to all Governors, Regents/Mayors across Indonesia and serves as a reference and guideline for Provincial Regional Governments, Regency/City Regional Governments, and Village Governments. Its primary objective is to provide clarity regarding the adjustments to the management of the Village Revenue and Expenditure Budget (APB Desa) following the enactment of the Regulation of the Minister of Finance (PMK) Number 81 of 2025.

Strategic National Policies as the Context

The issuance of PMK Number 81 of 2025 and this SEB is inseparable from pressing national strategic policies. Three critical policy instruments form the main background for these adjustments:

• Presidential Instruction (Inpres) Number 9 of 2025 concerning the Acceleration of the Establishment of the Red-and-White Village/Sub-district Cooperative.
• Inpres Number 17 of 2025 on the Acceleration of Physical Development of Outlets, Warehouses, and Facilities for the Red-and-White Village/Sub-district Cooperative.
• Presidential Decree (Keppres) Number 9 of 2025 establishing the Task Force (Satgas) for the Acceleration of the Establishment of the Red-and-White Village/Sub-district Cooperative.

These three regulations signal the government’s serious focus on strengthening village economic institutions through the Red-and-White Cooperative, which automatically requires the adjustment of Village Fund allocation and usage. Furthermore, anticipating the fiscal policy for the 2025 Fiscal Year was also a critical consideration in preparing the PMK and this Joint Circular of 3 Ministers.

PMK Number 81 of 2025 itself regulates three fundamental and urgent matters for Village Governments to implement:

• Support for the implementation of the Red-and-White Village Cooperative Legal Entity establishment. This means the Village Fund must be allocable to facilitate the legal and administrative process of establishing the cooperative.
• APB Desa support for the formation of the Red-and-White Village Cooperative. This refers to the concrete budgetary allocation from the APB Desa to finance the operational needs and initial development of the cooperative.
• The provision that Stage II Village Fund disbursement is only for earmarked activities. This change directly limits the flexibility of using Stage II Village Funds, triggering an urgent need to adjust previously planned non-earmarked APB Desa budgets.

Consequently, this SEB serves to provide detailed guidance and solutions to the budgetary issues arising from this policy focus shift.

Key Changes in PMK 81 of 2025 and the Impact on Stage II Village Funds

Regulation of the Minister of Finance Number 81 of 2025 on the Amendment to PMK Number 108 of 2024 brings significant implications for the mechanism of Village Fund disbursement and usage, particularly for the second stage. The core of this change is an emphasis on using the budget for established national priority programs. This aligns with the government’s effort to ensure the Village Fund truly supports strategic targets, one of which is the formation and strengthening of the Red-and-White Village/Sub-district Cooperative.

The Earmarking Mechanism

The crucial point regulated in PMK 81 of 2025 is that the Stage II Village Fund disbursement mechanism is limited only to activities whose usage has been predetermined (earmark). The term earmark refers to fund allocation that is locked in to finance specific programs or activities, such as Village Direct Cash Assistance (BLT Desa), food and animal security programs, or other programs mandated by legislation.

This restriction means that Village Funds previously budgeted by the Village Government for non-earmarked physical or non-physical activities (such as village infrastructure development, community empowerment, or other activities according to local authority) are now not disbursed in Stage II. This situation creates a financing gap for ongoing or even pre-planned and contracted activities.

The direct consequence of this change is the urgent need for Village Governments to adjust the management of the APB Desa. Non-earmarked activities that have been budgeted but whose funds cannot be disbursed from Stage II Village Funds must immediately find alternative funding sources. The Joint Circular of 3 Ministers explicitly outlines the solution steps to overcome this funding shortfall.

Solutive Steps for Financing Non-Earmarked Activities

Given the restriction on Stage II Village Fund disbursement to earmarked activities only, this SEB provides very detailed guidance on the steps Village Governments must take to finance physical and non-physical activities originally funded by the undisbursed non-earmarked Village Funds. The proposed solutions are hierarchical, starting from utilizing available fund surpluses to recording the shortfall as an outstanding liability for the subsequent fiscal year.

The Hierarchy of Alternative Financing

1. Utilize the Surplus of Earmarked Village Funds: The first step is to use the surplus of the determined Village Funds (earmark) to pay for outstanding non-earmarked activities. This involves identifying unused allocations from certain earmarked components (e.g., if the BLT Desa or food security allocation is larger than the required realization) that can be temporarily reallocated to cover the shortfall in non-earmarked activities.
2. Use Undisbursed Village Capital Participation Funds: If the earmarked Village Fund surplus is insufficient, the second step is to use the Village Capital Participation Funds for economic institutions that have not been disbursed and/or utilized. This includes Capital Participation Funds for Village-Owned Enterprises (BUM Desa) or Joint Village-Owned Enterprises (BUM Desa Bersama). These funds can be recalled or redirected to cover urgent shortfalls in other activities.
3. Utilize Current Year Budget Savings/Savings (2025): Village Governments are advised to use budget savings or uncommitted funds from the current year (2025). This includes savings from non-Village Fund revenues, such as the Village Fund Allocation (ADD) sourced from the Regency/City Regional Budget (APBD), or Village Original Revenue (PADes). The utilization of the 2025 Budget Surplus (SiLPA) is also permitted as a financing option.
4. Record the Shortfall as an Outstanding Liability (2026): If all the above steps are still insufficient to cover the entire payment shortfall, the remaining difference must be recorded as an outstanding liability. This liability must then be budgeted and paid in the 2026 Fiscal Year. Importantly, the source of payment for this liability in the 2026 Fiscal Year must come from revenues other than the Village Fund.

Administrative Adjustments and APB Desa Management for 2025 and 2026
The financing shortfall for non-earmarked activities due to PMK 81 of 2025 requires Village Governments to promptly adjust the management of the Village Revenue and Expenditure Budget (APB Desa). Governors, Regents, and Mayors are instructed to ensure that Village Governments execute these administrative and financial adjustments orderly, covering changes to the current year’s APB Desa (2025) and the following year’s APB Desa planning (2026).

Key Administrative Procedures

1. Immediate APB Desa 2025 Amendment: The Village Government must immediately perform an APB Desa Amendment for 2025 to shift budget allocations. This change must reflect the alternative financing sources used to cover the payment shortfall for non-earmarked activities, as outlined in the Solutive Steps section.
2. Disclosure in Financial Statements: The outstanding liability (the remaining shortfall not covered by alternative 2025 funds) must be disclosed in the Notes to the Financial Statements (CaLK) for the 2025 Fiscal Year. This is crucial for transparency and accountability, showing the village’s legitimate debt to be settled in the next fiscal year.
3. Head of Village Regulation for SiLPA Utilization: To guarantee the payment of the liability in the 2026 Fiscal Year, the Village Government is required to issue a Head of Village Regulation on the Elaboration of the 2026 APB Desa to follow up on the SiLPA prior to the 2026 APB Desa Amendment. This exceptional procedure allows the village to use the carry-over funds from the previous year for urgent needs—namely, settling the unpaid liability—before the 2026 APB Desa is comprehensively amended.
4. 2026 APB Desa Amendment: Subsequently, the Village Government must perform the 2026 APB Desa Amendment. The main goals are to utilize the 2025 SiLPA and to prioritize the settlement of the unpaid liabilities, with the funding source prioritized from non-Village Fund revenues.

The Role of Regional Government Supervision and Reporting Mechanism

The effectiveness of implementing the policies set out in PMK 81 of 2025 and the Joint Circular of 3 Ministers heavily relies on the active role of Regional Governments in providing guidance and supervision.

Supervision and Evaluation by the Sub-district Head (Camat)

Regents/Mayors are specifically tasked with instructing the Sub-district Head (Camat) to evaluate the 2025 APB Desa, particularly regarding the budget shifts to allocate funds for outstanding unpaid activities. The Camat’s evaluation role is vital for ensuring that the budget shifts are legitimate, logical, and correctly aimed at covering the non-earmarked payment shortfall, thus maintaining the financial accountability of the village.

Structured and Tiered Reporting

The SEB also mandates a structured reporting mechanism to monitor policy implementation across the country:

1. Regent/Mayor to Governor: The Regent/Mayor must submit a report on the execution of the SEB to the Governor.
2. Governor to Central Ministries: The Governor must then report the implementation to the three relevant central ministries:
   • • Minister of Villages and Disadvantaged Regions Development (focusing on village development and the progress of the Red-and-White Cooperative formation).
     • Minister of Finance (focusing on fiscal aspects, Village Fund disbursement, budget adjustments, SiLPA use, and liability management).
     • Minister of Home Affairs (focusing on village governance, the process of APB Desa amendments, and the compliance of Village Governments).

This tiered reporting system ensures vertical accountability and provides the Central Government with a comprehensive overview of the impact and follow-up to the new Village Fund policy.

Policy Implications for the Red-and-White Village Cooperative and Food Security

The primary focus of the policy changes explained in the Joint Circular of 3 Ministers is the full support for the national initiative concerning the Red-and-White Village/Sub-district Cooperative. This strategic agenda is directly mandated by the President through various legal instruments.

Support for Legal Entity Establishment and Capital

The support stipulated in PMK 81 of 2025 and the SEB has two main dimensions:

1. Support for the implementation of the Red-and-White Village Cooperative Legal Entity establishment: Village Fund allocations can be used to finance the necessary administrative and legal processes for the cooperative to operate legally.
2. APB Desa support for the formation of the Red-and-White Village Cooperative: This emphasizes investment and operational budget allocation, including the physical development of outlets, warehouses, and cooperative facilities as mandated by Inpres Number 17 of 2025.

Through the Village Capital Participation mechanism, funds from the APB Desa can be channeled to the Red-and-White Village Cooperative or relevant BUM Desa to strengthen their initial capital. However, the SEB also allows for the recall of undisbursed Capital Participation Funds to cover non-earmarked activity shortfalls, indicating managerial flexibility under specific conditions.

Consistency with Food Security Programs

While the policy focus shifts to the Red-and-White Cooperative, the SEB maintains consistency with other priority programs, especially Food Security. One of the alternative financing sources for outstanding non-earmarked activities is the undisbursed Village Capital Participation Funds for BUM Desa/BUM Desa Bersama, including those designated for food security.

This refinement in policy encourages Village Governments to integrate physical and economic development programs, establishing the Red-and-White Village Cooperative as a new axis for enhancing village welfare and economic self-sufficiency. The successful implementation of the Joint Circular of 3 Ministers will be crucial in determining how quickly and effectively the Red-and-White Village Cooperative can be established and operate.

Visit the Village Regulations page for official access.