Jakarta. Finance Minister Sri Mulyani said on Tuesday the government is decentralizing fiscal policies to promote social justice and improve government services for the people.

The government issued the Law on Central and Regional Financial Harmonization in January last year to strengthen coordination, accelerate economic growth, and distribute prosperity countrywide. 

"Regional funding through financial transfers and local taxation is accompanied by discretionary expenditure management to implement local government affairs that fall under their authority. This will be continuously improved and synergized between the central and regional governments," Sri Mulyani said in a hearing with the Regional Legislative Council in Jakarta on Tuesday.

Under the law, the central government improves the synergy and coordination of the local taxation system to conform to the national system and improve the quality of spending by regional governments.

This year marks the first implementation of the financial harmonization law and its derive regulations.
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They aim to improve the “local taxing power” and simplify regional policies in local taxes and levies, she said.

The law also seeks to improve financial transfer to regional governments and coordination with the funds earmarked to ministries and other state agencies.

The government is working to reform the regional finance management, accelerate budget spending by local governments, and build a digital system for monitoring and evaluation, she said.

"The local financial management should be continuously enhanced through capacity building, including their treasury management and the utilization of digital technology for monitoring," Sri Mulyani said. 

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