Minister of Finance Claims Fiscal Decentralization to Create Social Justice

Jakarta: Minister of Finance Sri Mulyani Indrawati said that fiscal decentralization is very important to create social justice. In addition, it needs to be done in order to improve services to the community that are getting better.
 
Therefore, he continued, the transfer of funding sources through Transfers to the Regions (TKD) and regional taxation, accompanied by discretion in spending management to carry out government affairs which are the authority of the regions will continue to be improved and synergized between the center and the regions.
 
He added that in the Law on Financial Relations Between the Central Government and Regional Governments (HKPD), the local taxation system, vertical and horizontal inequality has often been and continues to be reduced. In fact, the quality of regional spending is everyone's concern.

"Because the TKDD allocation has increased, and the harmonization between central and regional spending must be getting higher," said the Minister of Finance, quoted from his written statement, Wednesday, June 14, 2023.
 
The Minister of Finance revealed TKD has experienced a very significant increase. In 2023, TKD reached IDR 814.72 trillion, much higher than 2005 which amounted to IDR 150.5 trillion.
 
"So the increase from the nominal amount every year reflects that fiscal decentralization must increasingly reflect not only the increase in TKDD, but the service to the community and the prosperity felt by the people in the regions must be more real," said the Minister of Finance.
 
Furthermore, the Minister of Finance explained, TKD is the main source of income for the APBD, which is 68 percent. However, the contribution of Regional Original Income (PAD) has also increased to 27.4 percent. This illustrates that the economy in the region is increasing so that local sources of original revenue are also improving.
 
"We need to continue to increase local revenue without reducing investment opportunities. But at the same time, we also have to look at the quality of regional spending. This is often seen as one of the obstacles to continuing to improve the effectiveness of the APBN and APBD in encouraging improvements in prosperity and performance in the economy," said the Minister of Finance.
 
Personnel spending is the highest spending with an average portion of 35.01 percent. However, the portion is slowly decreasing from the previous 40.06 percent in 2013 to 34 percent in 2022. The Minister of Finance considers that regions need to be encouraged to increase productive spending which can stimulate the economy.
 
"We can see that in the regions, spending is still dominated by personnel spending, which in this case is experiencing a downward trend but is still quite high, namely at 34 percent. We need to see that the impact and benefits of APBD spending are directly felt by the community," concluded the Minister of Finance. (Kevin Schreiber)
 
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