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Regions told to spend funds or have them frozen
Regions with low budget absorption stand to see their regional funds âfrozenâ by the central government
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egions with low budget absorption stand to see their regional funds 'frozen' by the central government.
Finance Minister Bambang Brodjonegoro said on Friday that it plans to convert regional cash transfer funds into three-month treasury bills (SBN) for regions that post low budget absorption.
'This is our way to encourage regions to optimally use the transfer funds. Apparently a lot of them are just sitting idle within the banking system, when they should instead be disbursed to boost local economies,' he said in a discussion with the media.
Data from the Finance Ministry shows that the total amount of regional transfer funds currently in the banking system stood at Rp 273.5 trillion (US$19.68 billion) as of June.
The funds have climbed from previous levels of Rp 168.9 trillion in January and Rp 113.1 trillion in December last year. When compared to the last data recorded in December 2011, the latest figure had risen more than threefold.
'We already voiced our concern about this back in April, when the funds surpassed Rp 250 trillion, but it seems that no change has occurred and the figure just keeps on rising,' Bambang said.
Regional transfer funds are annually allocated by the central government for regional administrations as capital expenditure to finance various projects and for other purposes.
The funds are disbursed monthly using the banking system and are deposited at regional development banks (BPD), state banks or private banks.
For 2015, the government has set aside around Rp 643.8 trillion under the regional transfer funds budget and the figure is expected to increase to Rp 735.2 trillion, as already contained in the 2016 state budget draft.
Boediarso Teguh Widodo, the ministry's director general of inter-government fiscal relations, said that regional administrations would be required to submit monthly reports to the ministry, detailing their latest cash flows and usage of the regional budgets.
'We will match the data to their finances at the banks. If it turns out that their bank balance is higher than their operational spending for three months, it means that they have idle funds and must disburse them,' he said.
In the meantime, the next batch of funds ' consisting of general allocation funds (DAU) and revenue sharing funds (DBH) ' that were planned to be transferred as cash will be sent in the form of SBN.
'Those funds will be converted into three-month non-tradable treasury bills. However, the bills can be redeemed if the related administration can prove that it has begun disbursing the idle funds as required or if there is an emergency,' Bambang said.
On the contrary, the government will allocate Rp 5 trillion in next year's budget as incentive for regions that report satisfactory budget absorption.
The spending seeks to cement the requirement in the upcoming 2016 state budget, which is to be passed into law in October. It will also issue a separate Finance Ministry Regulation (PMK) to back the plan.
' JP/Tassia Sipahutar
