Golkar MPR Faction Pushes Regional Bonds as Solution to Fiscal Pressure
The proposal was discussed during the VII National Seminar themed ‘Regional Bonds as an Alternative for Regional Financing and a Public Investment Instrument’ held in Palembang, South Sumatra, on Tuesday.
Melchias Markus Mekeng, Chairman of the Golkar Faction of the MPR RI, emphasised that regional bonds could serve as a strategic solution to ensure regional development continues despite limited fiscal space. “This country must continue to progress, and regions must continue to advance. Therefore, one breakthrough to keep regions moving is through the issuance of regional bonds,” Mekeng stated.
Mekeng explained that the concept of regional bonds has been discussed since 2000, but the current momentum is deemed most appropriate as many regions are facing significant fiscal pressure. “It could be said that many regions are currently ‘dry’ in terms of funds. However, we must not stop there,” he added.
Mekeng noted that the Golkar Faction is currently drafting an academic paper to serve as the basis for regional bond regulations. This paper will be submitted to the DPR RI and the government, with hopes that the regulation will be included in the National Legislation Programme (Prolegnas). “It is my dream, and hopefully shared by others, that regional bonds could become law within this year,” he asserted.
According to Mekeng, strong regulation is essential to provide legal certainty for local governments to access alternative financing sources through the capital market. However, he cautioned that issuing regional bonds is a complex task, requiring mature financial management, high-quality human resources, and regional political stability.
Meanwhile, the Governor of South Sumatra, Herman Deru, welcomed the idea of regional bonds as a new financing instrument. He noted that this scheme could assist regions in meeting development targets outlined in their Regional Medium-Term Development Plans (RPJMD). “This is a bright spot for regions, not just South Sumatra, but all of Indonesia,” he said.
Herman Deru highlighted that many regional heads, particularly those in their first term, worry about failing to fulfil development promises due to budget limitations. He expressed South Sumatra’s readiness to serve as a pilot region should the policy be implemented nationally.
On the other hand, the Director General of Regional Financial Management at the Ministry of Home Affairs, Agus Fathoni, presented the national fiscal condition of local governments, noting that most regions remain in a weak fiscal category. “Out of all regions in Indonesia, only 44 are in a strong fiscal position, while 467 are in a weak fiscal position,” he revealed.
Agus stated that this condition necessitates financial innovation through the optimisation of local original revenue (PAD), expenditure efficiency, and creative financing schemes like regional bonds. While the legal basis for regional bonds exists within various regulations, such as the Capital Market Law and the Regional Government Law, the rules are currently scattered, necessitating a more integrated and stronger legal umbrella.
Agus explained that regional bonds offer several advantages over conventional loans, including flexible tenures, principal payments at maturity, and the ability to finance multiple projects simultaneously. Furthermore, he noted that regional bonds could increase public participation in development and strengthen transparency and accountability in regional financial management.