Causal Interaction between Regional Financial Performance and SDGs Achievement at the Provincial Level in Indonesia

Abstract

Purpose, The purpose of this study is to examine the causal interaction regional financial performance and the achievement of  SDGs   using a quantitative approach.

Methodology, The data used in this study consist of SDGs  indicators obtained from Statistics Indonesia for the period 2020–2024, and provincial revenue and expenditure budget data obtained from the Regional Financial Information System  portal for the period 2019–2023. The sample comprises 34 provincial governments in Indonesia.To measure the reciprocal influence and the interrelationship among the dimensions of the variables, the study employs the SEM approach.

Results, The findings reveal a positive and significant reciprocal relationship between regional financial performance and SDGs achievement. Moreover, the influence of regional financial performance on SDGs achievement is found to be stronger than the influence of SDG achievement on regional financial performance. The study also indicates that the spending efficiency and fiscal decentralization degree dimensions contribute significantly to regional financial performance, while the partnerships for the goals dimension provides the greatest contribution to SDG achievement.

Conclution: There is a (reciprocal) interaction between regional financial performance and the achievement of SDGs, and furthermore, the achievement of SDGs also has an impact on regional financial performance.

Limitation, This research is limited by the availability of data at the district and city levels, the restricted number of variables, and the relatively short observation period

Contribution, Providing an evidence-based policy framework on how improving regional financial performance can directly contribute to improving SDG achievement.