Home Subscribe Login Contact Us Search Journal Articles PFM RSS Feed

PFM Articles Search Journal Articles

Indonesia’s fiscal decentralization and its effect on provincial public finances

Author: JAN SEIFERT and HUI LI
Published in PFM, Vol. 15 No. 2

Recent studies of fiscal policy in Indonesia have looked at overall fiscal performance or the effect of decentralization on local governments but neglected the specific situation of provincial governments. In this paper we analyze the provinces’ position in the Indonesian fiscal framework after decentralization and discuss their fiscal autonomy as a separate level of government. We conduct this analysis by looking at five parameters: 1) fiscal health, 2) revenue and expenditure stability, 3) effectiveness in budget management, 4) fiscal inde-pendence, and 5) fiscal disparity. Almost 15 years into decentralization provinces show overall healthy fiscal positions with regular surpluses. However, we also find that revenue and expenditure vary strongly across years, provinces do a poor job in implementing planned budgets, they rely on the central government for more than half their revenues and there are great fiscal disparities across the provinces. We conclude by suggesting a number of measures provincial and national policymakers can take to improve the situation.

Subscribers: Login to read this article

Guests: Subscribe to PFM, or purchase individual article access for $10.
The article is not available for automatic download. We will email the article to you as a PDF file upon receiving your payment, typically within 24 hours.