Indonesia has increased the debt financing ceiling for regional governments to 0.18% of its gross domestic product (GDP) for the 2027 fiscal year, marking a rise from 0.11% in 2026. This adjustment, detailed in Finance Minister Regulation No. 76/2026, aims to reshape borrowing and fiscal management frameworks at the regional level.
The regulation also stipulates that regional budget deficits should not exceed 2.5% of GDP. To safeguard financial stability, regional governments are required to maintain a minimum debt repayment capacity ratio of 2.5. Additionally, their cumulative debt, combined with any new borrowings, must not surpass 75% of the previous year’s regional budget revenue that is not allocated for specific purposes.
In a bid to ensure transparency and accountability, regional administrations must submit reports on cumulative debt financing and repayment obligations to the finance minister and the minister responsible for domestic government affairs biannually. The deadline for the first-half report is set for July 31, 2027, while the second-half report is due by January 31, 2028.
Non-compliance with these reporting requirements may result in sanctions, including the suspension of financial transfers from the General Allocation Fund or Revenue Sharing Fund, as outlined in the applicable regulations.
This regulatory update establishes the fiscal framework for regional borrowing and budget management in Indonesia for the upcoming financial year, underscoring the government’s efforts to manage regional debt sustainably.