Instrument of Islamic Fiscal Policy to Reduce Government Budget Deficit: Business Cycle Simulation Approach Ega Rusanti (a*), Sri Herianingrum (b), Annisa Sasri Anindya (c), Nikmatul Atiya (d)
a) Faculty of Economic and Business, Airlangga University, Jl. Airlangga No.4 Surabaya, Indonesia
ega.rusanti-2022[at]feb.unair.ac.id
b) Faculty of Economic and Business, Airlangga University, Jl. Airlangga No.4 Surabaya, Indonesia
sri.herianingrum[at]feb.unair.ac.id
c) Faculty of Economic and Business, Airlangga University, Jl. Airlangga No.4 Surabaya, Indonesia
annisa.sasri.anindya-2022[at]feb.unair.ac.id
d) Faculty of Economic and Business, Airlangga University, Jl. Airlangga No.4 Surabaya, Indonesia
nikmatul.atiya.384577-2022[at]feb.unair.ac.id
Abstract
The aim of this study is to analyze the concept of utilizing Islamic fiscal policy instruments in an effort to reduce the government^s budget deficit. The research method used is qualitative research with a grounded approach which begins with analyzing empirical data and literature leading to the conceptual-theoretical level. The result shows that, in Islamic fiscal policy, zakat is used as the main income compared to taxes because it has a fixed rate and great potential, oiespecially when economic conditions are booming, so that zakat revenue can be fully used for government spending. Infaq, alms, and endowments (Waqf) can be used to reduce transfers and community assistance if they are managed sustainably in every economic cycle, especially when a recession occurs. Meanwhile, sukuk can be optimized if the country enters the recovery stage, where the government can reduce the burden of external debts and fund development through domestic investment in the form of sukuk. This research is limited to concept building through mathematical calculations only. it will be more comprehensive if further research can build a more practical conceptual framework. This research can be used as a basic reference in formulating policies with more optimal utilization of Islamic fiscal policy instruments so that they can play an active role in maintaining aggregate economic growth. There is no previous research that specifically discusses comprehensive Islamic policy instruments with a business cycle approach in reducing government budget deficits.
Keywords: Budget Deficit- Islamic Fiscal Policy- ZISWAF- Business Cycle
