Sri Mulyani Says HKPD Law Allows Regions To Have Enduring Funds Like LPDP

Minister of Finance Sri Mulyani (Photo: screenshot of the Ministry of Finance Youtube)

JAKARTA - Minister of Finance (Menkeu) Sri Mulyani revealed that the enactment of Law Number 1 of 2022 concerning Central and Regional Financial Relations (HKPD) allows local governments (Pemda) to develop more creative financial instruments.

One of the things mentioned by the Minister of Finance is the establishment of an educational and social endowment fund which is managed directly by the regional government.

“In this HKPD Law, for regions that have a surplus due to natural resources, they can build what is called an endowment fund. Just like the central government, which has an endowment fund for the LPDP (Education Fund Management Agency)," he said through an online channel when he inaugurated the socialization of the HKPD Law, Thursday, March 10.

According to the Minister of Finance, regions that have high fiscal capacity with good service quality are welcome to immediately establish an endowment fund for wider cross-generational benefit.

"The design of this endowment is a fund sourced from the APBD that does not reduce the basic fund," he said.

Then, the Minister of Finance also explained that the formation of the intended plan must provide economic, social and other benefits. Not only that, he also emphasized that the regional-style LPDP scheme could be a medium of contribution to improving education in the region.

"In principle, I emphasize that this endowment fund must be determined through regional regulations, managed by the general treasurer, and carried out in investments that are free from risk of impairment," he said.

For example, the Minister of Finance then gave an illustration of how the central government now has funds under LPDP's management of around Rp. 99.1 trillion.

Of that amount, the endowment for education is Rp. 81 trillion, the endowment for research is Rp. 7.9 trillion, the endowment for universities is Rp. 7 trillion, and the endowment for culture is Rp. 3 trillion.

These funds have now been used to facilitate the education (scholarships) of 29,872 people and support 1,668 scientific research.

For information, the LPDP which was initiated by the central government in 2007 initially only had a capital of Rp. 1 trillion. This allocation is then continuously increased by measuring the level of need for funds and being invested in instruments that are almost not risky, such as government securities (SBN).

"So this is tantamount to us saving for our future generations and not using the current surplus income to be spent directly," closed the Minister of Finance Sri Mulyani.