Financial Sustainability in the Spotlight: Unraveling the Impact of Financial Independence, Debt Ratio, and Capital Expenditure

The study investigates how financial independence, debt ratio, and capital expenditure affect the financial sustainability of local governments in Aceh Province, Indonesia. The results of this study indicate are intended to guide policymakers in districts and municipalities in Aceh, helping them develop strategies that promote financial sustainability without compromising future fiscal health or the quality of public services. The study analyzed data from 23 districts and municipalities in Aceh Province over a five-year period (2018–2022). The researchers employed panel data regression analysis using Eviews (version 12) and SPSS (version 23) software. Data sources consisted of local government financial reports that had been audited by the Supreme Audit Agency (BPK) and the BPS-Statistics Indonesia (BPS). The main findings show that financial independence is positively correlated with financial sustainability. In contrast, debt levels and capital expenditure show a negative impact on the economic sustainability of local governments.