Finance Minister Purbaya Says Indonesian Regions Not Yet Ready to Issue Municipal Bonds
No local governments in Indonesia have yet realised the issuance of regional debt securities or municipal bonds, even though the central government has provided support since late last year.
The Ministry of Finance, under the leadership of Finance Minister Purbability Yudhi Sadewa, has even released Technical Guidelines for the Issuance of Regional Bonds and Regional Sukuk Based on Sustainability in Indonesia since November 2026.
Purbaya explained that the absence of local governments issuing municipal bonds is primarily due to a lack of readiness. He noted that from the central government’s perspective, there is full support for local governments to seek funding sources within their respective regions.
“We basically support it, but the regions are not ready. It must undergo assessments by rating agencies and so on, so the regions are not ready yet; once they are ready, we will support them,” said Purbaya during a working meeting with Committee IV of the DPD in Jakarta on Monday (22/6/2026).
While expressing full support, Purbaya admitted that the issuance of regional debt securities must be carried out with extreme caution. This is because there is a precedent regarding the significant risks of municipal bonds if not managed well, such as the situation experienced in Argentina.
“However, we must be careful. Therefore, local governments must be truly responsible for their spending because we do not want to be like Argentina, where if the regions fail and cannot pay, the national economy collapses,” Purbaya emphasised.
As is known, the Technical Guidelines for the Issuance of Regional Bonds mention that the financing needs to provide basic infrastructure for the community across 38 provinces in Indonesia are currently very large, consisting of 77 national strategic projects listed in Presidential Regulation 12/2025.
These projects support the implementation of eight National Priorities with an indicated cost requirement of Rp 24,449.02 trillion.
Therefore, to finance regional infrastructure development, regional bonds and regional sukuk can be utilised for infrastructure financing, which includes: drinking water services; waste management; transportation; hospitals and health services; traditional markets; tourism and nature conservation areas; public housing; as well as local and regional ports.
The scope of regional bonds and regional sukuk has also been specifically regulated in Government Regulation No. 1 of 2024 concerning the Harmonisation of National Fiscal Policy (PP HKFN).
In that regulation, regional bonds are defined as securities in the form of debt recognition issued by Local Governments, while regional sukuk are defined as Sharia-based securities as evidence of participation in regional sukuk assets issued by Local Governments.
Nevertheless, these guidelines specifically state that regional bonds and regional sukuk are intended to drive regional development agendas aligned with the Sustainable Development Goals (SDGs).
Bappenas estimates that the financing needs for Indonesia’s SDGs from 2021 to 2030 will reach US$ 8.7 trillion (Rp 122,000 trillion), with a financing gap of US$ 1.7 trillion (Rp 24,000 trillion).
“Large-scale fund mobilisation through the use of innovative financing instruments is needed to overcome this financing gap,” as stated in the technical guidelines.