Do Fiscal Transfers Drive Local Budget Performance? Evidence from General and Special Allocation Funds in West Sumatra
List of Authors
Gerry Hamdani Putra, Mohd Danial Afiq Khamar Tazilah
Keyword
Regional Expenditure, Fiscal Transfers, General Allocation Fund, Special Allocation Fund, Fiscal Decentralization
Abstract
This study explores how two key fiscal transfer instruments the General Allocation Fund (GAF) and the Special Allocation Fund (SAF) shape regional expenditure patterns in West Sumatra. As Indonesia continues to strengthen its decentralized governance framework, understanding how intergovernmental transfers influence local budgeting has become increasingly important for improving fiscal performance. Using a quantitative explanatory approach, this research analyzes panel data from 19 regencies and cities across the province for the period 2017–2023, resulting in 133 observations. All data were obtained from official national sources, including the Central Statistics Agency (BPS) and the Directorate General of Fiscal Balance (DJPK). The empirical analysis employs panel regression models to evaluate the direct influence of GAF and SAF on regional expenditure. The findings show that both GAF and SAF significantly enhance regional spending capacity, confirming their essential role in supporting local service delivery and development programs. GAF contributes to overall fiscal stability and equalization across regions, while SAF demonstrates strong influence in stimulating sector-specific expenditures aligned with national priorities. These results highlight that intergovernmental fiscal transfers remain critical for ensuring spending adequacy at the subnational level, especially in regions with varying economic and administrative capacities. Strengthening the design, distribution mechanisms, and monitoring of fiscal transfers is therefore crucial to enhancing regional financial management and promoting more equitable development outcomes across Indonesia.