Indonesia has raised the ceiling for regional government debt financing to 0.18% of its gross domestic product (GDP) for the fiscal year 2027, marking an increase from 0.11% in 2026. This adjustment, outlined in Finance Minister Regulation No. 76/2026, sets the parameters for borrowing and budget deficit management for regional governments.
The new regulation also caps the maximum regional budget deficit at 2.5% of GDP. Regional governments are required to maintain a minimum debt repayment capacity ratio of 2.5. Furthermore, their combined outstanding debt and planned new borrowing must not exceed 75% of the previous year’s regional budget revenue that is not earmarked for specific purposes.
To ensure compliance, regional governments must report their cumulative debt financing and repayment obligations to both the finance minister and the minister responsible for domestic government affairs every six months. The first-half reports for 2027 are due by July 31, 2027, while second-half reports must be submitted by January 31, 2028.
Non-compliance with reporting deadlines could lead to sanctions, including the suspension of transfers from the General Allocation Fund or Revenue Sharing Fund, as per the applicable regulations. These measures form part of the government’s efforts to establish a robust framework for regional borrowing and fiscal management in the upcoming financial year.