Indonesia has set a new ceiling for regional government debt financing at 0.18% of the country’s gross domestic product (GDP) for the 2027 fiscal year, according to Finance Minister Regulation No. 76/2026. This marks an increase from the previous limit of 0.11% set for 2026. Additionally, the regulation establishes a maximum regional budget deficit of 2.5% of GDP for the same year.
The regulation outlines specific requirements for regional governments, including maintaining a minimum debt repayment capacity ratio of 2.5. Furthermore, the total outstanding debt financing, along with any planned new borrowing, must not exceed 75% of the previous year’s regional budget revenue that is not assigned to specific purposes.
To ensure compliance and fiscal management, regional governments are mandated to report their cumulative debt financing and repayment obligations biannually to the finance minister and the minister responsible for domestic government affairs. The 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 lead to sanctions, which may include the suspension of transfers from the General Allocation Fund or the Revenue Sharing Fund, as per existing regulations. These revised limits and requirements are part of Indonesia’s strategy to regulate regional borrowing and fiscal operations for the 2027 financial year.