Arnoldus Kristianus, Jakarta – The government has raised the ceiling on local governments' cumulative debt financing to 0.18% of gross domestic product (GDP) for 2027, up from 0.11% this year, while setting the maximum regional budget deficit at 2.5% of GDP.
The new limits are stipulated in Finance Minister Regulation (PMK) No. 76/2026 on the maximum cumulative regional budget deficit, regional budget deficit ceiling and cumulative regional government debt financing ceiling for the 2027 fiscal year.
The previous ceiling of 0.11% for the 2026 fiscal year was established under PMK No. 101/2025.
Under Article 7 of the new regulation, regional governments must maintain a minimum debt repayment capacity ratio of 2.5. Outstanding regional debt financing combined with planned new borrowing must also not exceed 75% of the previous year's regional budget revenue that is not earmarked for specific purposes.
Article 12 requires regional governments to report their cumulative debt financing positions and repayment obligations to the finance minister and the minister responsible for domestic government affairs every semester.
Reports covering the first half of 2027 must be submitted by July 31, 2027, while those for the second half must be submitted by Jan. 31, 2028.
Regional governments that miss the reporting deadlines may face sanctions, including the suspension of transfers from the General Allocation Fund (DAU) and/or Revenue Sharing Fund (DBH), in accordance with prevailing regulations.