Indonesia allows regional budgets to exceed 2027 deficit cap with approval
The standard ceiling is 2.5 per cent of projected regional revenue, with exceptions subject to debt limits and repayment-capacity requirements.
Indonesian regional governments may seek Finance Minister Suahasil Nazara’s approval to run 2027 budget deficits above 2.5 per cent of their projected revenue, subject to conditions on borrowing and repayment capacity.
Finance Minister Regulation No. 76 of 2026 sets the deficit ceiling and provides a route for exceptions. It also governs cumulative limits on regional budget deficits and debt financing.
To obtain permission to exceed the ceiling, regional governments must meet several financial requirements:
- The cumulative regional budget deficit funded through regional debt must remain within 0.18 per cent of projected GDP.
- Cumulative regional debt financing must also remain within a separate limit of 0.18 per cent of projected GDP.
- The regional financial capacity ratio for repaying debt financing must be at least 2.5.
- Outstanding debt financing plus planned drawdowns must not exceed 75 per cent of the previous year’s regional budget revenue that was not earmarked for specific uses.
Debt-financing plans, including regional loans, must also have received consideration from Suahasil, Home Affairs Minister Tito Karnavian and National Development Planning Minister Rachmat Pambudy. Approval additionally takes account of national fiscal policy affecting the region’s repayment ability and fiscal capacity.
