Government Prepares New Legal Framework for Regional Bonds

The Government is currently drafting a Bill on Regional Bonds (“Draft Bill”), which is intended to update the legal framework for Regional Governments (“Pemda”) to utilize bond/sukuk issuances as an alternative means of financing regional development and meeting infrastructure needs independently through the capital market.

"We hope that, through the issuance of regional bonds or sukuk, regional governments will have access to an alternative source of financing that allows them to become more financially independent," said Hasan Fawzi, Chief Executive of Capital Market, Financial Derivatives, and Carbon Exchange Supervision at the Financial Services Authority (OJK), in an interview with Hukumonline.

This initiative is in line with the OJK's ongoing efforts to formulate an OJK Regulation ("POJK") on the issuance of regional bonds and sukuk. The proposed regulation is intended to serve as the technical implementation and regulatory harmonization of Law No. 1 of 2022 on Financial Relations between the Central Government and Regional Governments and Government Regulation No. 1 of 2024 on the Harmonization of National Fiscal Policy ("PP 1/2024").