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Overview of Indonesian Budgetary Processes

Indonesia’s budgetary processes are complex and in some ways unique[1].  Several articles in Indonesia’s Constitution bear directly on the character of Indonesia’s State budget: State sovereignty is invested in the people and is exercised in accordance with law (Article 1:2); the President exercises the power of the State (Article 4:1); the House of Representatives (DPR) is vested with lawmaking authority: comprising power to legislate, approve budgets and conduct oversight of government (Article 20:1 and Article 20A); the State budget (APBN for short) is to be determined annually by law and implemented in an open and accountable manner in order to maximize public welfare (Article 23).

In 2003—as part of its program of reform post-Soeharto and as a sign of its intention to restore the original purposes of State budgeting—the Indonesian government passed a new law (No 17/2003) on State Finances.  This was the first time since the colonial era that Indonesia had modernized its financial legislation: previously, its budgetary processes had been based on the Dutch system called Indische Compatbiliteit Wet (ICW for short) dating from the 1920’s.  The reform process saw the enactment of several other budget-related laws: Law No. 1/2004 on the State Treasury, Law No. 25/2004 on State Planning, Law No. 32/2004 on Regional Governance, Law No. 33/2004 on Fiscal Balance and Law No. 15/2004 on State Audit.

Indonesia is a unitary state with a decentralized system of regional government[2].  The national budget (APBN) is the preserve of the central government and the DPR.  Budgets at the sub-national or local government level are called APBDs: there are currently 529 separate APBDs produced by local governments and approved by elected local consultative assemblies (known as DPRDs) in each region; consistent with the unitary nature of the Indonesian State, APBDs also require central government (specifically the Ministry of Home Affairs) approval before implementation.

It takes almost a year to plan, draft, discuss and adopt a budget at both the national and local level. In the case of APBNs (State budgets), the process begins with national-level community consultations on development planning (known as Musrembangnas) held early in the budget planning year (in Indonesia, fiscal years run from 1 January to 31 December).  Government then draws up its budget assumptions, policies and work plans and submits these to the DPR in May.  In June, the DPR’s Budget Committee (known as Banggar) meets with government officials to form a number of budget working groups; the ensuing discussions involve all eleven of the DPR’s sectoral committees or commissions (Komisi I-XI) who meet with representatives of ministries/agencies they oversight.   By July Banggar finalizes its report of these preliminary discussions and continues discussion of the budget outline.  On 16 August the President delivers his budgetary discourse before Parliament, at the same time tabling the government financial statement, the draft APBN and proposed work and budget plans for each central government ministry/agency (known as RKA K/L). The APBN is adopted into law by a plenary session of the DPR in October.  Detailed implementation of the budget is then spelt out in Presidential decrees and “budget implementation check lists” (called DIPAs) prepared for each ministry/agency.  The budget begins to be implemented on 1 January.

Indonesian budget law provides for a mid-year budget revision process.   Budget revision processes mirror the normal budgetary process and end with the adoption of the revised budget (known as APBN-P).

Guidelines for the formulation and adoption of local government budgets are laid down in Minister of Home Affairs regulation No. 13/2006 concerning “Guidelines for Management of Local Finances” and various ministerial edicts since then.  Processes at the local level mirror those used for State budgets.  The following tables provide details of key local government budget documentation and the timetable set for various stages of the budgetary process (for an explanation of the acronyms and technical terms used in these tables see the “Glossary of Indonesian Budget Related Terms and Abbreviations” included in this website).

[1] As a supplement to this summary, readers are referred to a comprehensive report on Indonesia’s State budgetary processes done in 2009 by the OECD to be found at

[2] At the time of writing (October 2012) there were 529 local governments in Indonesia: 34 provincial governments; 402 kabupaten (rural semi-rural districts) governments and 93 city governments.

Table 1: Key Local Government Budgetary Documentation

Planning Phase     Discussion  Phase Implementation Phase Accountability Phase
  • Local government work plans (RKPD)
  • Work plans of local government work units/departments (SKPDs)
  • Basic Budget Policies (KUA) and provisional budget priorities & funding levels (PPAS)
  • Budget and work plans of each local SKPDs
  • Local regulation adopting local budget (APBD)
  • Local head of government (HoG) regulation outlining details of APBD
  • Budget implementation checklist (DPA) for each local SKPD
  • Local government regulation adopting revised local budget (APBD-P)
  • Local HoG regulation providing details of APBD-P
  • Report on first semester budget outcomes
  • Local regulation on accountability of APBD implementation
  • Information on report on implementation of local governance (ILPPD)
  • Reports on implementation of local governance (LPPD)
  • Local government accountability report (LKPJ)

Table 2: Schedule of Activities Carried out during Budget Planning Year

Month Week
June Preparation of draft KUA KUA submitted to DPRD Discussion of KUA
July Adoptionn of KUA PPAS submitted to DPRD Discussion of PPAS Adoption of PPAS
August Preparation of “Budget & Work Plans” of local government work units (RKA SKPD)
September Compilation of RKA SKPD Compilation of draft local budget (APBD0)
October Draft APBD submitted to DPRD Discussion of draft APBD
November Discussion of draft APBD
December Adoption of APBD Evaluation of adotped APBD by provincial government and the Ministry of Home Affairs