Jakarta Governor Pramono Anung received Bali Governor I Wayan Koster\nand Badung Regent I Wayan Adi Arnawa early last week, on Tuesday\n(4\/8\/2026), to discuss alternative development financing, such as\nregional bonds or municipal bonds.<\/p>\n
During the meeting at Jakarta City Hall, Pramono said that in\naddition to regional bonds, the discussion also covered the utilisation\nof the Floor Area Ratio (KLB), the Principle Approval Letter for\nLand\/Location Acquisition (SP3L), and various other financing\ninstruments.<\/p>\n
\u201cIn any case, in the current economic conditions, the challenge of\nincreasing regional budgets can no longer be addressed through\nconventional means. There must be breakthroughs or out-of-the-box\napproaches,\u201d Pramono said, as quoted from a written statement on Monday\n(10\/8\/2026).<\/p>\n
Pramono revealed that specifically regarding the regional bonds to be\nissued by the Jakarta Provincial Government in 2027, the success of the\nprocess would be shared with the Bali Provincial Government according to\nneeds and applicable regulations.<\/p>\n
\u201cIn the preparation process for issuing regional bonds, the Jakarta\nProvincial Government can share its experience with the Bali Provincial\nGovernment, from drafting the policy framework, coordinating with\nrelevant ministries and institutions, to fulfilling regulatory\nrequirements,\u201d he said.<\/p>\n
On a separate occasion, the Head of the Economic Policy Research\nCentre at the Faculty of Economics and Business, Brawijaya University\n(PPKE FEB UB), Prof.\u00a0Candra Fajri Ananda, assessed that the central\ngovernment must open up space for Jakarta and Bali\u2019s plans to issue\nregional bonds.<\/p>\n
According to him, the central government need not be overly concerned\nabout the risks of such instruments as long as all requirements and\ngovernance principles are met.<\/p>\n
\u201cThe central government, both the Ministry of Finance and the\nMinistry of Home Affairs, need not be too afraid to give the Jakarta\nProvincial Government room to issue regional bonds as long as all\nrequirements, transparency, governance, and project feasibility are\ntruly fulfilled,\u201d he said.<\/p>\n
He emphasised that regional bonds are not a new instrument. The\ngovernment has been building the regulatory framework since 2006 and has\ncontinued to refine it, most recently through Minister of Finance\nRegulation (PMK) Number 87 of 2024.<\/p>\n
\u201cThis means the government is actually very cautious in regulating\nthe issuance of these regional bonds,\u201d he said.<\/p>\n
This caution is reflected, among other things, in the application of\nthe debt service coverage ratio (DSCR) to measure a region\u2019s ability to\nmeet its debt obligations.<\/p>\n
\u201cIf I am not mistaken, the minimum DSCR is 2.5. So, if the ratio is\nabove that threshold, the region is deemed capable of paying its\nobligations,\u201d Candra asserted.<\/p>\n
Candra said risk control is important because several countries have\nexperienced problems due to regional debt issuance that was not matched\nby repayment capacity.<\/p>\n
Argentina, for example, once gave regions the freedom to issue debt\nsecurities until a number of regions eventually defaulted.<\/p>\n
\u201cAt that time, almost all regions in Argentina competed to issue debt\nsecurities. But when the ability to pay was inadequate, defaults\neventually occurred,\u201d he said.<\/p>\n
Therefore, regional bonds must be directed towards financing\nproductive projects with economic benefits. Such projects should ideally\nhave a cost recovery mechanism so that a clear source of repayment is\navailable.<\/p>\n
\u201cFor example, to finance the construction of toll roads, markets,\nhospitals, LRT development, or other projects that can generate\nrevenue,\u201d he said.<\/p>\n
Candra assessed that the bond issuance mechanism involving the\ncentral government, the Financial Services Authority (OJK), and rating\nagencies has become a risk control instrument to ensure issuance is\ncarried out selectively.<\/p>\n
For Jakarta, he assessed the risk as relatively low because it is\nsupported by strong fiscal capacity. The planned issuance of around\nRp3.5 trillion is also relatively small compared to Jakarta\u2019s regional\nbudget of around Rp81 trillion, while the remaining budget surplus\n(SILPA) is recorded at around Rp5 trillion.<\/p>\n
\u201cIf payment problems occur, in theory there is still fiscal room that\ncan be used. Moreover, the figure of Rp3.5 trillion is relatively small\ncompared to Jakarta\u2019s regional budget of around Rp81 trillion. Jakarta\u2019s\nfiscal capacity is very high and need not be doubted,\u201d Candra said.<\/p>\n
According to him, these conditions give Jakarta the opportunity to\nbecome an example of prudent regional bond implementation while also\nserving as a reference for other regions.<\/p>\n
\u201cIf Jakarta succeeds in issuing and managing them well, this could\nbecome a role model for other regions. This means we have a real example\nthat regional bonds can be carried out prudently,\u201d he said.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/after-jakarta-bali-eyes-issuing-municipal-bonds-whats-behind-it-1786323032", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }