Transforming the Paradigm of State Expenditure, Not Merely Chasing Absorption
Until the end of the year (fourth quarter), it is still common for the procurement of goods and/or capital expenditure processes to be completed right at the close of the fiscal year. At first glance, successfully spending the budget sounds like an achievement.
However, this pattern of accumulating expenditure at year-end (year-end spending dump) is actually “disadvantageous” to the state and society. When disbursements are slow at the beginning of the year, state funds essentially “lie dormant” or can be termed idle cash in the State General Cash Account (RKUN).
In fact, the state budget is the “fuel” for the economic engine. When government projects are delayed, the creation of new jobs and the circulation of money in society are also delayed. Benefits that should have been enjoyed by society from the beginning of the year are held back until the end of the year.
Therefore, amid our priority to boost economic growth, this old mindset must be abandoned immediately. Merely chasing percentage targets to achieve 100% budget absorption at year-end is no longer relevant.
We need a paradigm shift: From accumulating expenditure at year-end and simply spending money, towards planned and impactful quality spending (spending better). It is this focus on the quality of spending that will ensure every rupiah spent truly delivers maximum economic benefits to society.
Shifting the Paradigm towards Spending Better
In the management of the State Revenue and Expenditure Budget (APBN), the old paradigm prioritised absorption percentages. This has been improved with the implementation of performance-based budgeting, where each ministry/institution has set output achievement targets for their spending performance.
The financial performance success of ministries/institutions is no longer measured solely by how many rupiah have been spent, whether it exceeds the spending target or not, but also by the quality of budget planning, the quality of budget execution, and the quality of budget execution outcomes. When the spending percentage target is no longer the main goal, it is hoped that development benefits can align with expectations (outcome) and be maximally felt by society.
In line with the above, the government is now continuously promoting the transition to the spending better principle or quality spending. This concept is not just about savings, but the application of the value for money principle.
This means that every rupiah disbursed from the state treasury must meet three indicators: Economy (non-wasteful and productive expenditure), efficiency (maximum output achievement with minimum input), and effectiveness (program outcome achievement in line with set targets) and executed at the right time.
Correlation with Economic Growth: The Working of the Multiplier Effect
Why is the quality and timing of state spending so crucial for the economy? The answer lies in basic economic theory known as the multiplier effect.
As an illustration, when the government allocates capital expenditure for public infrastructure such as roads or bridges, the flow of funds does not stop with the contractor. Project workers will receive monthly wages, which they will then spend on daily needs at shops around the project.
Shop owners whose income increases will use that money to buy raw materials at traditional markets, and market traders will spend it again on other needs. One government spending transaction can trigger a long chain of money circulation in society. This is the essence of the multiplier effect.
The Urgency of Timeliness (Timing)
The timing of expenditure execution is very determinant of how much this multiplier effect works. If the government only disburses large budgets in November or December, the chain of economic circulation does not have enough space and time to work maximally in the current year. State money seems to “sleep” in the state treasury for months without providing any stimulus.
Conversely, through spending better, the government is encouraged to realise spending from the first quarter (January-March). With earlier and more planned spending execution, state money will have much longer time to circulate, drive the real sector, create new jobs, and ultimately, maximally boost national economic growth. State money is not just depleted as recorded in financial reports, but truly transforms into an engine for societal welfare.
Untangling the Knot: Obstacles and Acceleration Strategies
Implementing the spending better concept theoretically sounds ideal, but in practice, state budget execution is not as easy as turning the palm of the hand. In public finance theory, there is a basic principle called accountability, where every rupiah of state money spent must be accountable to the people.
This strict principle of prudence often creates obstacles in the field. Budget implementers in various government agencies sometimes face psychological hurdles in the form of fear of administrative errors that lead to audit findings or state losses.
As a result, bureaucratic processes become very cautious and slow. In addition, large-scale goods and services procurement processes (such as building or road construction) require selection or tender stages that can take months.
So, how does the state ensure budgets can be disbursed faster without violating legal rules? The government implements several tactical and systemic strategies.