Fiscal Performance Optimization Strategy

Oct 13, 2025 by talynt.org 59 views

The Effect of Foreign Debt, Tax Revenue, and State-Owned Profit on Government Fiscal Performance

Introduction

The Indonesian government's fiscal performance is a critical aspect of the country's economic development. The government's ability to manage its finances effectively is essential to achieve its national development goals. In this study, we examine the effect of foreign debt, tax revenue, and state-owned profit (BUMN) on the fiscal performance of the Indonesian government. Using time series data from 1995 to 2019, we applied an error correction model (ECM) approach to analyze the relationship between these variables.

Background

The Indonesian government's fiscal performance has been a subject of interest for many researchers and policymakers. The government's ability to manage its finances effectively is crucial to achieve its national development goals. In recent years, the government has faced significant challenges in managing its finances, including a large foreign debt and a significant budget deficit. The government has also been criticized for its inefficient use of state-owned enterprises (BUMN) and its failure to collect sufficient tax revenue.

Methodology

This study used time series data from 1995 to 2019 to examine the effect of foreign debt, tax revenue, and BUMN profit on the fiscal performance of the Indonesian government. We applied an error correction model (ECM) approach to analyze the relationship between these variables. The ECM approach is a statistical method that is used to analyze the relationship between a dependent variable and one or more independent variables. In this study, we used the following variables:

Foreign debt: This variable represents the amount of foreign debt held by the Indonesian government.
Tax revenue: This variable represents the amount of tax revenue collected by the Indonesian government.
BUMN profit: This variable represents the profit earned by state-owned enterprises (BUMN) in Indonesia.
Fiscal performance: This variable represents the government's fiscal performance, which is measured by the government's budget balance.

Results

The results of this study showed that each independent variable has a different impact on fiscal performance, both in the short and long term.

Foreign Debt

Foreign debt has a negative influence on fiscal performance both in the short and long term, but the influence is not significant. That is, although foreign debt has the potential to suppress fiscal performance, the impact is not too strong and cannot be relied upon as the main factor that affects fiscal performance.

Tax Revenue

Tax revenue, on the contrary, has an influence positive and significant on fiscal performance both in the short and long term. This indicates that an increase in tax revenue directly has a positive impact on government fiscal performance, both in a short period of time and long periods of time.

BUMN Profit

BUMN profit also shows the effect positive on fiscal performance in the short and long term. However, this influence is not significant. That is, although BUMN profits have the potential to improve fiscal performance, the impact is not as strong as tax revenue and cannot be relied upon as the main factor that affects fiscal performance.

Conclusion

From the results of this study, it can be concluded that tax revenue is a key factor that encourages the fiscal performance of the Indonesian government. Increased tax revenue has been proven to have a positive and significant impact, both in the short and long term. Foreign debt and BUMN profit also have an important role in fiscal performance, but the effect is not as strong as tax revenue. It is essential for the government to manage foreign debt wisely and ensure that the use of the debt really has a positive impact on the national economy.

Fiscal Performance Optimization Strategy

To improve fiscal performance, the government needs to implement the following strategies:

Improving the Efficiency and Effectiveness of Tax Revenue

The government needs to continue to increase taxpayer compliance, expand the tax base, and strengthen the tax administration system.
The government can also consider implementing tax reforms to make the tax system more efficient and effective.

Utilizing BUMN Profit Optimally

The government can direct BUMN profits to support strategic development programs and have a direct impact on improving the welfare of the community.
The government can also consider privatizing BUMN to increase efficiency and effectiveness.

Strengthening the Management of Foreign Debt

Increasing transparency and accountability in the management of foreign debt is very important to avoid potential risk and ensure that debt is used effectively and efficiently.
The government can also consider implementing debt management strategies to reduce the risk of debt.

By maximizing tax revenue, managing foreign debt wisely, and utilizing optimal BUMN profits, the government can improve fiscal performance and achieve better national development goals.

Recommendations

Based on the results of this study, we recommend that the government:

Increase taxpayer compliance and expand the tax base to increase tax revenue.
Direct BUMN profits to support strategic development programs and improve the welfare of the community.
Implement debt management strategies to reduce the risk of debt.
Increase transparency and accountability in the management of foreign debt.
Consider privatizing BUMN to increase efficiency and effectiveness.

By implementing these strategies, the government can improve fiscal performance and achieve better national development goals.
Frequently Asked Questions (FAQs) about the Effect of Foreign Debt, Tax Revenue, and State-Owned Profit on Government Fiscal Performance

Q: What is the main finding of this study?

A: The main finding of this study is that tax revenue has a positive and significant impact on government fiscal performance, both in the short and long term. Foreign debt and BUMN profit also have an important role in fiscal performance, but the effect is not as strong as tax revenue.

Q: What is the impact of foreign debt on government fiscal performance?

A: Foreign debt has a negative influence on fiscal performance both in the short and long term, but the influence is not significant. This means that although foreign debt has the potential to suppress fiscal performance, the impact is not too strong and cannot be relied upon as the main factor that affects fiscal performance.

Q: What is the impact of tax revenue on government fiscal performance?

A: Tax revenue has a positive and significant impact on government fiscal performance, both in the short and long term. This means that an increase in tax revenue directly has a positive impact on government fiscal performance, both in a short period of time and long periods of time.

Q: What is the impact of BUMN profit on government fiscal performance?

A: BUMN profit also shows the effect positive on fiscal performance in the short and long term, but the influence is not significant. This means that although BUMN profits have the potential to improve fiscal performance, the impact is not as strong as tax revenue and cannot be relied upon as the main factor that affects fiscal performance.

Q: What are the implications of this study for government policy?

A: The implications of this study for government policy are that the government should prioritize increasing tax revenue, managing foreign debt wisely, and utilizing optimal BUMN profits to improve fiscal performance. The government should also consider implementing tax reforms, privatizing BUMN, and increasing transparency and accountability in the management of foreign debt.

Q: What are the limitations of this study?

A: The limitations of this study are that it only examines the effect of foreign debt, tax revenue, and BUMN profit on government fiscal performance, and does not consider other factors that may also affect fiscal performance. Additionally, the study only uses time series data from 1995 to 2019, and may not be representative of other time periods.

Q: What are the future research directions based on this study?

A: The future research directions based on this study are to examine the effect of other factors on government fiscal performance, such as government spending, economic growth, and demographic changes. Additionally, the study could be replicated using data from other countries to see if the findings are generalizable.

Q: What are the practical implications of this study for policymakers?

A: The practical implications of this study for policymakers are that they should prioritize increasing tax revenue, managing foreign debt wisely, and utilizing optimal BUMN profits to improve fiscal performance. Policymakers should also consider implementing tax reforms, privatizing BUMN, and increasing transparency and accountability in the management of foreign debt.

Q: What are the policy recommendations based on this study?

A: The policy recommendations based on this study are:

Increase taxpayer compliance and expand the tax base to increase tax revenue.
Direct BUMN profits to support strategic development programs and improve the welfare of the community.
Implement debt management strategies to reduce the risk of debt.
Increase transparency and accountability in the management of foreign debt.
Consider privatizing BUMN to increase efficiency and effectiveness.

By implementing these policy recommendations, policymakers can improve fiscal performance and achieve better national development goals.