LOCAL FINANCIAL INDEPENDENCE OUTLOOK TO COPING WITH UNCONDITIONAL SITUATION: EVIDENCE OF MUNICIPAL GOVERNMENT IN INDONESIA

Abstract

Financial independence has a significant influence on handling unconditional situations. The COVID-19 pandemic, as a true shock situation, brings a new perspective to managing local finances. Indonesia’s local government heavily depends on transfers of funds from the central government. The autonomy system has been implemented for twelve years; however, local financial independence has not changed. The central government transferred 86.36 Trillion Rupiah to the local government to help it cope with the pandemic. This research aims to analyze financial independence's responses to shocks from three dimensions: anticipatory capacities (AC), coping capacities (CC), and vulnerabilities. This research used a qualitative approach and archival data analysis from 2014–2021 with 93 samples of municipal governments. Research findings indicate that municipal governments have limited capabilities to anticipate and cope with unconditional situations. The municipal government's budget capacity and financial resilience are low to cope with the unconditional situation. Local financial independence has not changed significantly while fiscal decentralization has been implemented for 20 years