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Original Research Article Open Access SINTA 2 Accredited

Assessment of Regional Fiscal Capacity Through Provincial Capital Direct Participation

Authors

  • Gusti Ngurah Rai * Corresponding author
  • Aln Pujo Priambodo
DOI
10.21787/jbp.18.2026.2972
Published & Pages
7 June 2026 · pp. 155-173
Manuscript History
Received11 Feb 2026 Accepted7 Apr 2026 Published7 Jun 2026
License
CC Attribution-NonCommercial-ShareAlike 4.0
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437 Views 354 Downloads

Abstract

In order to accelerate socio-economic growth, local governments often allocate their budgets to direct expenditures and capital investments. However, an issue arose under strict budget constraints, exacerbated by unequal regional fiscal capacities to fund strategic development programs. Moreover, such instrument impacts have been variously debated across the study. This study was designed to examine the impact of provincial government direct capital participation (PMD) and various parameters on local fiscal capacity (IKFD) using path analysis, unveiling both direct and indirect effects. The data were collected from 34 provinces over the period 2017–2024. Mediatory variables, such as Local Fiscal Autonomy (LFA) and KDD, were also incorporated within the model. The findings highlighted the significant effects of PMD, gross fixed capital formation, LFA, and regional capital expenditure in corroborating local fiscal capacity, thereby increasing the urgency of management of the respective instruments. Ultimately, local fiscal capacity advancement through good governance will potentially return substantial benefits, providing more financial capacity for strengthening the socio-economic state and supporting national agendas.

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