Indonesia’s government has raised the cap for regional government debt financing to 0.18% of the nation’s gross domestic product (GDP) for the fiscal year 2027, marking an increase from the previous limit of 0.11% set for 2026. This adjustment is part of the new guidelines detailed in Finance Minister Regulation No. 76/2026, which outlines borrowing and budget deficit requirements for regional governments.
In addition to the debt financing limit, the regulation also establishes a maximum regional budget deficit of 2.5% of GDP. These measures are aimed at enhancing fiscal management and borrowing practices among regional authorities across Indonesia.
To ensure fiscal responsibility, regional governments are required to maintain a minimum debt repayment capacity ratio of 2.5. Furthermore, their outstanding debt, combined with any planned new borrowing, must not exceed 75% of the previous year’s regional budget revenue that is not allocated for specific purposes.
The regulation mandates that regional governments report their cumulative debt financing and repayment obligations to the finance minister and the minister responsible for domestic government affairs every six months. Reports for the first half of 2027 are due by July 31, 2027, while those for the second half must be submitted by January 31, 2028.
Failure to meet these reporting deadlines could result in sanctions, including the suspension of transfers from the General Allocation Fund or Revenue Sharing Fund, as stipulated by existing regulations. These changes are designed to establish a clearer framework for regional borrowing and ensure effective fiscal management in the coming years.