Regional finance still highly dependent on central funds: minister

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The finances of regional administrations are still highly dependent om allocations from the central government as seen during the COVID-19 crisis, Finance Minister Sri Mulyani Indrawati said.

“The regions do only rely on the central government,” she remarked during information dissemination on the Regional and Central Government Finance Relations (HKPD) Law in Riau province, accessed online from here on Friday.

When the central government faced pressure due to the pandemic that made the economy “stop and drop,” regional administrations apparently did not have alternative ways, so they either “stopped or dropped.”

This condition was driven by the decreasing transfers from the central to regional administrations as the central economy contracted during the pandemic in 2020, she explained.

Regional administrations had not contributed to becoming shock absorbers, thereby making the state budget (APBN) the only absorber when the crisis happened, she added.

“Regional budget (APBD) was only the impact. It was unable to become an active shock absorber,” she stressed.

Regional administrations were also unable to take loans when the spending was greater than the revenue as well as to keep the loans prudent, she added.

Such issues should be addressed through synergy between the regional and central governments so that the regions can be independent when there is pressure.

The HKPD Law is among the government’s efforts to meet the challenge, the minister said.

The law will focus on meeting various challenges on fiscal de-centralization by bolstering local taxing power, which will bear on a region’s capability to gain regional revenue.

The law is attempting to address the issue so that regions can improve their fiscal and spending policies.

“It aims to enhance the output and outcome qualities that the community can finally enjoy in the form of welfare,” Indrawati remarked.

Source: Antara News