Bank Indonesia Urges Java Regions to Expand Development Financing Beyond APBD
Bank Indonesia is playing a role as a strategic advisor to regional governments. This was emphasised at the Coordination Meeting for Accelerating Investment and Regional Economic Growth in the Java Region 2026, held in Surabaya on Tuesday (11/8/2026). The forum is part of the Road to Java Regional Economic Forum (JREF) 2026 series.
Bank Indonesia is taking concrete steps through regional economic and financial assessments, mapping potential investment projects, strengthening the Regional Investor Relations Unit (RIRU), and facilitating meetings between regional governments and investors, banks, financial authorities, and development financing institutions.
“Regional governments in Java are encouraged to expand sources of development and investment financing, not only relying on the Regional Revenue and Expenditure Budget (APBD),” said Ibrahim, Head of the Bank Indonesia Representative Office for East Java.
Director General of Regional Financial Development at the Ministry of Home Affairs, Agus Fatoni, said that alternative financing needs to be accompanied by strengthening fiscal capacity and regional government governance. “It is necessary to consider regional financial capacity, regulatory readiness, and institutional readiness,” said Agus.
A number of schemes that regional governments can utilise include regional loans, Public-Private Partnerships (KPBU), issuance of regional bonds and sukuk, optimisation of regional assets, and blended finance.
The need for alternative financing is considered important because investment is one of the main pillars of Java’s economy. In the second quarter of 2026, Java’s economy grew by 5.65 percent year on year (yoy), an increase compared to 2025 growth of 5.30 percent. Investment was recorded as contributing 29.68 percent to Java’s Gross Regional Domestic Product (PDRB).
Assistant Deputy at the Coordinating Ministry for Economic Affairs, Yuli Sri Wilanti, said that expanding infrastructure financing sources is necessary to accelerate connectivity development and increase business entity involvement in developing regional leading sectors. “The utilisation of creative financing is expected to accelerate infrastructure provision, improve connectivity, and open greater space for business entity involvement,” she said.
However, the availability of financing schemes does not automatically guarantee their implementation. Regional governments still face challenges in terms of project readiness, regulatory certainty, institutional capacity, and human resources.
Bappenas noted that various creative financing instruments are available and permitted by regulation. Nevertheless, their implementation is still constrained by regional government readiness.
The coordination meeting established three focus areas: strengthening understanding and governance of creative financing, preparing feasible and bankable investment projects, and strengthening the financing ecosystem through regulation, institutions, human resources, and central and regional government coordination.