Tito: Regional bond issuance must be approached with caution

Jakarta (ANTARA) - Minister of Home Affairs Tito Karnavian said the issuance of regional bonds must be carried out with great care, in response to plans by the DKI Jakarta Provincial Government.

“From the Ministry of Home Affairs’ perspective, bonds must be handled very carefully, because this involves borrowing, issuing debt instruments,” he said when met at the parliamentary complex in Senayan, Jakarta, on Tuesday.

According to him, the issuance of regional bonds needs to consider regional governments’ ability to repay the debt so as not to burden subsequent administrations.

“The principle is that it must not create a burden for the incoming regional head. Many regional heads have confided in me that they have to shoulder debts incurred by previous administrations,” Tito said.

He considered regional debt acceptable if used to finance productive activities that generate income to repay the debt while also boosting locally generated revenue (PAD).

He cited productive debt examples, such as building a hospital managed as a regional public service agency (BLUD) capable of generating revenue to service the debt whilst turning a profit.

However, the Home Affairs Minister warned that issuing bonds to finance unproductive development could burden the next regional head.

“If they build something unproductive that then creates a burden for the next regional head, well, that must be handled very carefully,” he said.

He specifically cautioned about this risk for regions with low financial capacity, noting that additional debt through bond issuance could further strain regional finances.

“Imagine if a region has low capacity, already has debt, and is then asked to issue bonds on top — that would be even heavier for the next regional head. They would end up in the red,” Tito said.

Previously, the DKI Jakarta Provincial Government targeted issuing regional bonds worth Rp5.6 trillion in stages in 2027 and 2028.

DKI Jakarta Governor Pramono Anung Wibowo said the financing instrument is projected to serve as an alternative funding source to accelerate infrastructure development and improve the quality of public services.

“This regional bond issuance plan has been proposed in the KUA-PPAS (General Budget Policy and Temporary Budget Ceiling Priorities) of the 2027 Regional Budget,” Pramono said at a Capacity Building event on Regional Bond Issuance in Jakarta on Tuesday (4/8).