Finance Ministry urges Central Papua Provincial Government to establish regional endowment fund
Nabire (ANTARA) - The Republic of Indonesia’s Ministry of Finance is urging the Central Papua Provincial Government to establish a Regional Endowment Fund (DAD) to strengthen long-term fiscal capabilities.
A representative from the Directorate General of Fiscal Balance (DJPK) of the Ministry of Finance, Gribig Darodjat, stated in Nabire on Wednesday that DAD is a fund sourced from the regional budget that is perpetual in nature, with the proceeds from its management usable for regional expenditure without reducing the principal amount.
“For example, if the regional government allocates Rp1 trillion for DAD, that principal amount must not be touched. However, the regional government can receive a percentage of the management returns from DAD, which can be used for regional spending,” said Gribig during a socialisation event on the establishment of DAD.
He explained that DAD is placed in financial instruments offered by credible financial institutions, ensuring that the initial investment value is not affected by fluctuations in the money market or capital market.
To that end, DAD can only be stored in Government Securities (SBN), bonds for projects guaranteed by the government, and deposits in healthy banks.
“The selected financial instruments offer optimal returns and are free from the risk of value depreciation, so fluctuations will only affect the returns,” he stated.
He added that regional governments with DAD can enhance or expand public services that are priorities for the region without depending on budgets from the central government.
DAD stored over a long period can provide economic benefits, social benefits, or other benefits and can be utilised across generations.
“DAD can be accounted for as part of fulfilling mandatory expenditures in accordance with applicable laws and regulations, including budgets for education, health, and infrastructure spending,” he said.
Staff Assistant II for Economics, Finance, and Social Welfare Affairs of Central Papua Province, Herman Kayame, stated that the establishment of DAD aims to provide opportunities for regional governments to manage regional finances more optimally.
DAD is not only oriented towards short-term needs but also ensures that future generations can still enjoy the benefits from the government funds allocated at present.
“The establishment of DAD also requires extensive discussions to formulate concrete steps in its formation amid current economic dynamics and limitations in revenue sources,” he said.