Increased Regional Transfers Deemed Effective to Strengthen Local Fiscal Capacity

Jakarta (ANTARA) - Senior economist at Paramadina University, Wijayanto Samirin, has assessed the government’s plan to increase the regional transfer budget (TKD) as an effective solution to support the fiscal needs of regional governments.

Accelerating the disbursement could help regions gain greater room to finance development programmes and public services. Nevertheless, Wijayanto believes the policy must be accompanied by a more sustainable strengthening of TKD.

“This is the right step, but only a temporary solution. What regions need is more adequate TKD, not merely faster disbursement,” Wijayanto said when contacted by ANTARA in Jakarta on Thursday.

Beyond improving disbursement timing, the government is also being urged to evaluate the revenue-sharing formula between the central and regional governments to make it fairer.

He added that budget savings achieved through TKD adjustments should be avoided going forward, as they risk merely shifting deficit pressure from the central government onto regional governments.

Meanwhile, regional governments’ ability to raise their own source revenue (PAD) also varies, and their room to seek alternative financing sources remains relatively limited.

Wijayanto also argued that issuing regional government debt securities is not yet an ideal option, as there are few precedents and it could raise concerns over fiscal sustainability.

This approach, he believes, is safer for safeguarding regional fiscal health while supporting the continuity of development across various regions.

Previously, Finance Minister Purbaya Yudhi Sadewa conveyed plans to add TKD allocations for 490 regional governments facing budget constraints in financing mandatory spending.

However, the implementation of the plan still awaits a decision from President Prabowo Subianto.