Jakarta. Jakarta Governor Pramono Anung will continue pursuing plans to issue around Rp 5.6 trillion ($319.65 million) in municipal bonds despite Finance Minister Purbaya’s call for local governments to be cautious about issuing debt.

The bond plan, whose value has increased from an initial Rp 3.5 trillion, has drawn attention from the Finance Ministry over potential fiscal risks, while Jakarta argues that additional financing is needed to fund strategic development projects.

Purbaya has warned that local governments should not rush to issue bonds, citing the potential for regional debt problems to eventually affect the national economy.

“Based on the experience in Brazil, provinces were previously allowed to issue debt, with the assumption that it was separate from the central government. But when they defaulted on a large scale, the central government was also held responsible,” Purbaya told reporters in Jakarta on Tuesday.

He said that if local governments are unable to meet their bond obligations, the central government could ultimately have to shoulder the debt, putting pressure on national fiscal conditions.

“Once there is a problem, it becomes much bigger. Eventually, the country’s fiscal condition is also disrupted. That is what we want to prevent as much as possible,” Purbaya said.

He added that local governments should assess whether borrowing is necessary based on their available funds.

“Basically, my calculation is, if you have plenty of money, why borrow? But if you need it, then there is nothing wrong with borrowing,” he said.

Jakarta policy observer Zulfikar Marikar said the Finance Ministry and Jakarta administration should instead establish a joint fiscal framework to assess the economic value of the planned Rp 5.6 trillion bond issuance.

He said the increase in the planned issuance should not be viewed solely as an effort to increase debt, particularly as Jakarta faces limited fiscal space.

“The debate should not stop at the dichotomy of ‘debt or no debt,’ but should shift toward how far the instrument can provide measurable economic benefits for Jakarta and nationally,” Zulfikar said.

Zulfikar said the differing views between Jakarta and the Finance Ministry were a normal part of balancing the central government’s responsibility to maintain national fiscal discipline with Jakarta’s growing development needs.

However, he said the differences should not develop into a conflict over authority. The two sides should discuss the benefits, risks, financing structure and repayment capacity of the bonds transparently.

The bond proceeds are planned to finance strategic infrastructure, including the Manggarai-Dukuh Atas route of the Jakarta LRT and the healthcare sector.

Zulfikar warned that delaying vital projects because of limited regional budgets could have broader economic consequences, including increased congestion, losses from flooding and a decline in Jakarta’s investment appeal.

Jakarta recorded Rp 173.6 trillion in investment realization in the first half of 2026, equivalent to 17.2% of total national investment. Zulfikar said the figure underscored Jakarta’s strategic role in the Indonesian economy, as development activity in the capital supports supply chains, employment and demand for construction materials from other regions.

“The central government’s prudence in anticipating the risk of default is indeed very important. However, such prudence should not close the space for regional financing as long as the risks are properly managed,” Zulfikar said.

He proposed establishing a Jakarta-Central Government Fiscal Framework containing common parameters such as a safe debt limit, project feasibility requirements, stress tests and indicators of social and economic benefits.

The framework should ensure that bond proceeds are used for productive investment rather than routine spending, with each project required to demonstrate measurable economic returns.

Zulfikar also called for Jakarta’s debt-servicing capacity to be tested under various crisis scenarios, alongside public transparency on interest costs and repayment plans.

He further proposed a permanent fiscal coordination forum between Jakarta and the central government to help maintain economic stability.

“Through synergy and measurable governance, the bond instrument is expected to maintain the continuity of Jakarta’s investment while supporting sustainable national economic growth,” Zulfikar said.

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