Budget Cuts and Government Performance in Indonesia: A Systematic Literature Review

Abstract

Budgetary cuts represent a fiscal policy instrument that governments routinely implement to maintain financial stability, restructure spending priorities, and improve public sector efficiency. However, these policies often compromise service delivery quality and diminish organizational performance in government agencies. This study examines how budget cuts affect government performance, with particular attention to policy frameworks and implementation obstacles. We conducted a systematic literature review of ten empirical studies examining budget refocusing, efficiency measures, and fiscal rationalization across central and local government agencies. Budget cuts produce contradictory outcomes: while program restructuring enhances efficiency and accountability, it simultaneously constrains organizational flexibility, delays development objectives, and creates substantial adaptation costs. Major implementation barriers include inadequate planning capacity, bureaucratic inertia, resource constraints, and poor inter-agency coordination, particularly at regional levels. In conclusion, policy effectiveness depends critically on institutional capacity and governance quality. Robust fiscal management and adaptive strategies are necessary to maintain government performance under fiscal constraints.