Indonesia has set new fiscal parameters for regional governments in 2027, as outlined in Finance Minister Regulation No. 76/2026. The regulation increases the ceiling for cumulative regional government debt financing to 0.18% of the country’s gross domestic product (GDP), a rise from the previous limit of 0.11% for 2026. Additionally, the maximum regional budget deficit has been established at 2.5% of GDP.
The regulation mandates that regional governments uphold a minimum debt repayment capacity ratio of 2.5. It also stipulates that the total of outstanding debt financing and planned new borrowing must not exceed 75% of the previous year’s regional budget revenue, excluding funds allocated for specific purposes.
To ensure compliance and transparency, regional governments are required to submit reports on their cumulative debt financing and repayment obligations to both the finance minister and the minister responsible for domestic government affairs on a biannual basis. 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 may result in sanctions, including the suspension of transfers from the General Allocation Fund or Revenue Sharing Fund, as per the applicable regulations. These measures are part of Indonesia’s broader framework aimed at enhancing regional borrowing and fiscal management for the 2027 financial year.