Central Government Prepares Solutions for Regions Facing Fiscal Difficulties
Jakarta (ANTARA) – The central government, through the Ministry of Home Affairs and the Ministry of Finance, has formed a joint technical team to map and develop solutions for local governments experiencing fiscal difficulties.
The strategic measure was agreed at a meeting between Home Affairs Minister Tito Karnavian and Finance Minister Suahasil Nazara at the Home Affairs Ministry building in Jakarta on Tuesday evening.
Tito said the initial mapping would focus on regions with very limited room in their regional budgets (APBD), because personnel expenditure accounts for a disproportionately large share—between 40 and 50 per cent of their total budgets.
He said the high burden of personnel costs was hampering the effective implementation at local level of the many priority development programmes set by the central government.
To address these budgetary constraints, the two ministries are deploying a technical team involving several directorates-general to comprehensively examine options for restoring local governments’ financial health.
“There will be a technical team from the Finance Ministry’s directorates-general that will communicate directly with the Director-General of Regional Financial Development and the Director-General of Fiscal Balance to discuss concrete solutions for these regions,” he said.
In addition to devising ways to mitigate the difficulties faced by regions with limited fiscal capacity, the ministries are aligning the integration of the state budget (APBN) and regional budgets so they can deliver tangible, phased interventions to improve people’s welfare across the country.
The effort is part of a broader drive to ensure the state is present in communities.
“We also discussed providing fiscal incentives to regions. Last year, the Finance Minister provided them through the Ministry of Home Affairs, and the amount was quite substantial,” Tito said.
Finance Minister Suahasil Nazara said the fiscal incentives were designed to foster healthy competition among regional leaders in meeting key development indicators, including controlling inflation, reducing poverty, improving environmental quality, increasing budget disbursement and lowering unemployment.
He said the central government had set aside a provisional Rp1 trillion in regional incentives (DID) in the state budget, both to recognise and encourage local government performance.
“The regional incentive fund currently budgeted in the state budget is provisionally Rp1 trillion. We will design it to encourage regional governments to work towards better development indicators, such as inflation control and improved environmental quality,” Suahasil said.