ABSTRACT
Fiscal sustainability has become the focus in the world, particularly since the crisis that swept Asia in 1997/1998, as well as the global crisis in 2008. To respond to the crisis, many countries have relied on financing the state. In Indonesia, the management of the crisis in 1997/1998 created a burden for the state constituting 96% of the gross domestic product (GDP), and the state’s budget changed from having surplus to suffering deficit at 1.7% of the GDP, with a decrease in GDP by about 13%, and inflation rate of 78%. It has created fiscal burden and limited fiscal movement, and affected fiscal vulnerability, which in turn affected fiscal sustainability. The development was unable to be resumed optimally. Such fiscal conditions have reduced the government’s options to take actions and reliability to alleviate the financial crisis. Actually, the global economic situation can cause the financial turmoil occurring in a country to propagate quickly to other countries and turn into a crisis. Based on the review of legislation, the latest update shows that fiscal measures are no longer being relied upon in responding to a financial crisis. It is hoped that the government can maintain fiscal sustainability to enhance fiscal functions to achieve the objectives of the state.
