DKI Jakarta Plans to Issue Bonds, Economists Issue Warning
Economists have voiced their opinions regarding the debate surrounding the plan to issue regional bonds in DKI Jakarta, which has become a subject of public controversy.
Senior Economist at the Institute for Development of Economics and Finance (INDEF), Didik J. Rachbini, stated that the aspirations of Jakarta Governor Pramono Anung to issue regional bonds must face various administrative challenges. The issuance plan, according to Didik, must obtain approval from the Regional House of Representatives (DPRD) and the central government.
“Realistically, the Jakarta Governor’s hope to issue regional bonds is still difficult to achieve, as it must obtain approval from the central government,” Didik said in a press release, as quoted on Friday (11/09/2026).
Based on Law Number 1 of 2022 concerning the Financial Relationship between the Central Government and Regional Governments (HKPD), the issuance of regional bonds must receive approval from the Regional House of Representatives (DPRD), the Ministry of Home Affairs, the Ministry of Finance, and the Financial Services Authority (OJK).
“Under the HKPD Law, the issuance of regional bonds is not autonomous or something that can be decided solely by the regional head. This issuance process must obtain approval and involve coordination from four main agencies/institutions,” Didik explained.
Furthermore, regional governments should be more cautious when intending to issue regional bonds. This is because the risk of default is quite high if the regional government is unable to meet its obligations regarding the bond issuance.
“The Minister of Finance, Purbaya, reminds regional governments to be careful with debt, as seen in the case of Brazil, where issuance led to a default that directly impacted the central government. This warning is based on real-world examples where regional bond defaults subsequently damaged the national economy,” he explained.
The Brazilian case serves as a lesson for emerging markets. Mass defaults on regional bonds occur due to a combination of loosened debt regulations without strict controls, political moral hazard, and bureaucratic issues arising from the expectation of bailouts from the central government.
On the other hand, Jakarta’s Regional Revenue and Expenditure Budget (APBD) is more than sufficient, having reached nearly Rp 91 trillion in the previous year.
However, the central government also needs to limit bond issuances to avoid burdening the State Revenue and Expenditure Budget (APBN), as the state may have to cover debts from such issuances.
“Reckless debt issuance causes the APBN to become unhealthy because the interest that must be paid by taxpayers is among the highest in the world, reaching up to 7%,” he stated.
Therefore, it is advisable for the Jakarta regional government to maximise its existing budget rather than issuing regional bonds.
“It is better to maximise Jakarta’s already large budget instead of following the central government’s pattern, because existing debt is already sufficiently straining the APBN,” he concluded.