UMY Expert: Fiscal Governance Reform Key to Mitigating Efficiency Impacts

Yogyakarta (ANTARA) - Economics expert from Universitas Muhammadiyah Yogyakarta (UMY) Prof. Dr. Imamudin Yuliadi has stressed the importance of improving fiscal governance as the primary instrument to mitigate the negative impacts of the government’s ongoing budget efficiency policy. Speaking in Yogyakarta on Wednesday, Imamudin stated that the understanding of budget efficiency must clearly distinguish between reducing productive spending and efforts to curb budget leakages. “If efficiency is interpreted as reducing budget allocations to the regions, then clearly the economic strength driven by the government will diminish. However, if efficiency is understood as an effort to reduce budget leakages, then it is a very positive step,” he said in a press statement. He highlighted the fiscal challenges facing the Yogyakarta Special Region (DIY) government in 2026, where budget tightening is occurring due to a reduction in central transfer funds of Rp167 billion and Special Autonomy Funds of Rp400 billion. According to him, regions with strong private sectors, such as those on Java Island, have better resilience because they are supported by the services, education, and tourism sectors. Conversely, regions that are highly dependent on government spending will face more significant pressure. Tourism is the economic backbone in DIY, and amid economic pressures from budget efficiency and rising fuel prices, Imamudin believes the tourism sector can serve as the region’s main economic buffer. “This is because the tourism sector has a multiplier effect that can drive other sectors, such as transportation, culinary, accommodation, and even MSMEs,” he said. However, he cautioned that MSMEs are currently under pressure from two directions: rising production costs due to the surge in fuel prices and weakening public purchasing power. “The government needs to pay special attention to sectors that are basic needs for MSMEs. The fiscal space available from improved governance should be redirected to support these productive sectors,” he added. Despite facing various challenges, Imamudin expressed optimism that the Indonesian economy will move in a positive direction within the next two to three months. This optimism is fuelled by easing global geopolitical tensions, which could lower world oil prices, and the trend of a strengthening rupiah exchange rate. He asserted that the main key to recovery lies in improving government governance, especially in the implementation of strategic national programmes such as the Free Nutritious Meals programme and strengthening village cooperatives. “If the governance of natural resources and strategic programmes is improved, the fiscal space will be much more relaxed. The impact can be used to strengthen education, health, MSME development, and sustainable job creation,” he said.