Jakarta. Home Affairs Minister Tito Karnavian on Tuesday urged regional governments to exercise caution when issuing bonds, responding to Jakarta's plan to raise Rp 5.6 trillion ($316.5 million) through municipal debt in 2027 and 2028.

Tito said the central government wanted to ensure that regional borrowing does not leave future administrations struggling with debts incurred by their predecessors.

“The Home Affairs Ministry's position is that bond issuance must be approached very carefully because it essentially means issuing debt securities,” Tito told reporters in Jakarta.

He said regional governments must carefully assess their ability to service the debt before issuing bonds, particularly when repayment obligations could extend beyond the term of the administration that initiated the borrowing.

“The principle is that it should not become a burden for the next regional head,” Tito said.

“Many regional heads are now complaining to me because they have to bear debts incurred by previous administrations.”

Tito said regional borrowing could be justified when the proceeds are used to finance productive investments.

Ideally, he said, debt-funded projects should generate revenue that can help repay the borrowing while also increasing locally generated revenue.

By contrast, using bonds to finance projects that do not generate economic or fiscal returns could create new financial problems for regional governments, he warned.

The risks are particularly significant for regions with limited fiscal capacity, as additional borrowing could further strain their finances and leave subsequent administrations with difficult repayment obligations.

Jakarta Plans Bond Issuance in 2027-2028
The Jakarta provincial government has announced plans to issue Rp 5.6 trillion in regional bonds in stages during 2027 and 2028.

Jakarta Governor Pramono Anung has said the bonds would provide an alternative source of financing to accelerate infrastructure development and improve public services.

Tito did not reject Jakarta's proposed bond issuance but emphasized that regional governments considering such financing must ensure their borrowing remains manageable and is directed toward economically productive purposes.

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