Law Number 17 of 2025: The Blueprint for Indonesia’s 2026 Economic Transformation

The Government of Indonesia has officially enacted Law Number 17 of 2025 concerning the State Revenue and Expenditure Budget (APBN) for the 2026 Fiscal Year. This law is not merely numbers on paper; it is a manifestation of the government’s strategic vision to realize equitable welfare, aligned with the constitutional mandate of the 1945 Constitution. A fundamental pillar of the 2026 budget is the strong commitment to accelerating development from the periphery by optimizing the role of villages as independent and competitive engines of national economic growth.

Within the framework of the 2026 budget, villages are positioned as crucial subjects of development through a more targeted Village Fund policy. Through this fiscal instrument, the government seeks to ensure that every rupiah provides a real impact on the quality of life in remote areas, especially in facing climate change and food security challenges. This policy is also part of the “Asta Cita” grand strategy to ensure economic equity reaches even the furthest hamlets.

The implementation of Law Number 17 of 2025 demands high professionalism from all stakeholders. With digital integration through the OMSPAN TKD system, transparency and accountability in fund flows are expected to minimize the risk of budget irregularities. The 2026 development focus is directed toward economic transformation via the Red and White Cooperative, extreme poverty eradication, and strengthening village digital infrastructure.

Main Structure of APBN 2026: National Economic Foundations

Before exploring the village sector, it is essential to understand the macro framework of the 2026 budget designed to maintain macroeconomic stability. Under Law Number 17 of 2025, the structure of state spending and revenue is directed toward sustainable economic growth:

• State Revenue: Planned to reach IDR 3,153.58 trillion from taxation, non-tax revenue (PNBP), and grants.
• State Expenditure: Allocated at IDR 3,842.72 trillion, covering Central Government Spending and Transfers to Regions (TKD).
• Budget Deficit: Set at 2.68% of GDP or IDR 689.14 trillion with measured financing.

Village Fund 2026: Allocations for Local Independence

Law Number 17 of 2025 allocates Village Fund 2026 totaling IDR 60.57 trillion to support national local independence. This allocation is an integral part of the regional transfers intended to support governance, development, and community empowerment.

Equitable Allocation Mechanisms

The IDR 60.57 trillion allocation is divided into two primary components based on the regulation:

• Formula Allocation (IDR 59.57 Trillion): Consisting of Basic Allocation (65%), Affirmative (1%), Performance (4%), and Formula (30%) considering the Geographical Difficulty Index.
• Incentive Allocation (IDR 1.0 Trillion): Awards for villages with the best financial management performance and central policy implementation.

Focus of Village Fund Usage in Law Number 17 of 2025

The 2026 budget policy explicitly sets the focus for the use of Village Funds to support sustainable development and climate resilience at the village level:

1. Extreme Poverty Eradication: Distribution of Village BLT to the most vulnerable beneficiary families (KPM).
2. Food and Energy Security: Strengthening village granaries and local economic institutions for local food sovereignty.
3. Health and Stunting: Improving basic health services and programs to accelerate the national stunting reduction target.
4. Infrastructure and Cash for Work: Implementation of Village Cash for Work (PKTD) to absorb local labor directly.
5. Village Digitalization: Developing digital infrastructure to accelerate technological transformation in rural areas.
6. Village Operational Funds: Use of operational funds up to a maximum of 3% of the village’s received ceiling.

Economic Innovation: The Red and White Village Cooperative

A revolutionary point in Law Number 17 of 2025 is the strong support for the Red and White Village Cooperative (KDMP). The 2026 budget provides financial support mechanisms for these cooperatives to become new economic drivers. Furthermore, this regulation allows for an “intercept” mechanism of regional transfers or Village Funds to guarantee loan repayments, ensuring long-term rural economic stability.

Inter-Ministerial Synergy in Rural Development

Village development under the 2026 framework is supported not only by Village Funds but also through the spending of relevant ministries:

• Ministry of Villages and PDT: Allocation of IDR 2.50 trillion for village capacity building.
• Ministry of Home Affairs: IDR 852.7 billion for local and village government capacity programs.
• Digital Synergy: Full data integration through the Ministry of Finance’s OMSPAN TKD system.

Welfare Targets for 2026

Through Law Number 17 of 2025, the government sets significant quality-of-life targets to be achieved in the coming fiscal year:

• Poverty Rate: Target reduction within the range of 6.5% to 7.5%.
• Extreme Poverty: Pressed down to reach 0% to 0.5%.
• Farmer Welfare Index: Targeted at 0.7731.
• Open Unemployment Rate: Targeted at 4.44% to 4.96%.

Conclusion

Law Number 17 of 2025 confirms that the village is the heart of the “Asta Cita” strategy to build from the bottom up for equitable economic growth. With a 2026 Village Fund allocation reaching IDR 60.57 trillion, the government aims to transform rural Indonesia into independent, climate-resilient, and prosperous economic centers.

Visit the Village Regulations page for official access.