Indonesia has decided to raise the ceiling for cumulative regional government debt financing to 0.18% of its gross domestic product (GDP) for the fiscal year 2027. This marks an increase from the previous limit of 0.11% set for 2026. Additionally, the government has established a maximum regional budget deficit of 2.5% of GDP for the same year.
The updated limits are part of Finance Minister Regulation No. 76/2026, which provides guidelines for borrowing and budget deficit management by regional governments in 2027. Under this regulation, regional authorities are required to maintain a minimum debt repayment capacity ratio of 2.5. Furthermore, their outstanding debt, along with any new planned borrowing, must not exceed 75% of the previous year’s regional budget revenue that is not designated for specific purposes.
Regional governments must also adhere to reporting requirements, submitting their cumulative debt financing and repayment obligations to the finance minister and the minister responsible for domestic government affairs every six months. 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 result in sanctions, which might include the suspension of transfers from the General Allocation Fund or the Revenue Sharing Fund, as per the applicable regulations. The revised limits aim to provide a structured framework for regional borrowing and fiscal management in Indonesia for the 2027 financial year.