Speaking at a press briefing in Jakarta, Purbaya said the experience of countries that allow regional governments to issue debt showed that financial problems at the local level could eventually affect the central government.
“If you look at the lessons from countries in Latin America, Brazil, I think regional governments or provinces were once allowed to issue debt, and they were considered separate from the central government,” Purbaya said.
“But when problems arose, the central government was also held responsible. Once it became a problem, the country’s economy was affected as well,” he added.
The Jakarta provincial government has submitted a proposal to issue regional bonds.
Purbaya said he was not prohibiting Jakarta from issuing bonds, but hoped regional governments would take steps to minimize the potential impact of such issuance on the national economy.
Jakarta Governor Pramono Anung Wibowo said last week that he would proceed with plans to issue regional bonds to help finance development projects in the capital.
Pramono made the statement in response to Purbaya’s call for regional governments not to rush into issuing bonds.
“After all, the Jakarta government knows what its needs are. Mr. Purbaya said that Jakarta has a lot of money. But we have also been asked to undertake a lot of development. And development requires funding,” Pramono said on Friday.
Pramono said that while he had taken the minister’s advice into consideration, he would still submit the proposal for Jakarta to issue regional bonds.
He also called on the central government to restore Jakarta’s revenue-sharing funds (DBH) to their previous level if regional governments were being asked not to rush into issuing regional bonds.
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Translator: Imamatul Silfia, Kuntum Khaira
Editor: Primayanti
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