The Effect of Foreign Exchange Rate Fluctuations, Project Duration, and Restructuring on the Utilization Rate of Foreign Loans in the “Cities Without Slums” Program for the 2016–2022 Period

Abstract

The absorption of foreign loan funds in government programs often faces significant gaps between committed financing and actual disbursement, particularly in multi-lender programs like the City Without Slums Program, where cumulative absorption has only reached 61.8 percent of the total USD 762.8 million loan value. This research aims to analyze the effect of foreign exchange rate deviations, project life, and restructuring on the absorption ratio of foreign loan funds in the City Without Slums Program for the 2016–2022 period. This study used a quantitative approach with secondary data compiled in the form of provincial-year panel data. The analysis unit consisted of 34 provinces during the seven years of observations, resulting in 238 observations. The analysis technique used was panel data regression with a fixed effect model. The results of the study show that foreign currency exchange rate deviation has a significant negative effect on the absorption ratio of foreign loan funds. The life of the project has a significant positive effect on the fund absorption ratio, while restructuring also has a significant positive effect. The adjusted R-squared value of 0.6061 shows that the model is able to explain the variation in the fund absorption ratio of 60.61 percent. These findings show that the absorption of foreign loan funds is not only influenced by the availability of financing, but also by external pressures, the maturity of project implementation, and managerial responses. This research strengthens the application of contingency theory in the context of public sector accounting and foreign loan management.