Issuance Of Regional Bonds Strictly Regulated, OJK Says It Must Fulfill Fiscal Approval And Evaluation

JAKARTA - The Financial Services Authority (OJK) emphasized that local governments (Pemda) that plan to issue Regional Bonds (Obda) or Regional Sukuk (Sukda) are required to submit Registration Statements to the OJK, accompanied by approval from the Ministry of Finance (Kemenkeu).

The Chief Executive of the Capital Market Supervisory, Derivative Finance and OJK Carbon Exchange, Inarno Djajadi, explained that the process of issuing Obda/Sukda must go through a number of stages of cross-ministerial supervision to ensure its implementation is in accordance with the provisions of the legislation.

"In examining the Registration Statement document, the OJK will coordinate with the Ministry of Finance to ensure that the issuance is carried out in accordance with applicable regulations and the purpose of using funds has been clearly determined," he said in his statement, Thursday, October 9.

Inarno said that before giving the approval, the Ministry of Finance would conduct a thorough evaluation of regional fiscal conditions and plans to use funds, to ensure that the issuance of bonds or regional sukuk has met the provisions.

The provisions are regulated in the Minister of Finance Regulation (PMK) Number 87 of 2024 concerning Procedures for Issuance and Purchase of Regional and Regional Sukuk Bonds by the Regional Government.

According to him, the issuance of bonds or regional sukuk is only allowed if the plan to use funds is considered productive, for example, for infrastructure development or improvement of public services and not for consumptive or routine spending.

In PMK 87 of 2024, there are a number of requirements including:

Inarno conveyed that all these requirements can ensure that only local governments with healthy financial conditions, good governance, and productive plans for the use of funds can issue bonds or regional sukuk.

"This arrangement can prevent the risk of default and systemic risks that have the potential to disrupt the stability of the national financial system, as well as strengthen the credibility of the regional bond market in Indonesia," he explained.

Meanwhile, the legal basis for issuing Regional Bonds and/or Regional Sukuk refers to a number of regulations, namely, Law Number 23 of 2014 concerning Regional Government; Government Regulation Number 1 of 2024 concerning Fiscal Policy Harmonization; Minister of Finance Regulation Number 87 of 2024 concerning Procedures for Population and Repurchase of Regional Bonds and Regional Sukuk by Regional Governments; and POJK Number 10 of 2024 concerning Issuance and Reporting of Regional and Regional Sukuk Bonds.

Furthermore, Inarno emphasized that the OJK will carry out strict supervision of the use of funds resulting from the issuance of Obda/Sukda, in accordance with information on the use of funds listed in the prospectus and approved by the Ministry of Finance.

"OJK as the regulator supervises the use of funds resulting from the issuance of regional bonds or sukuk through the Realization Report on the Use of Funds (LRPD) submitted by the Regional Government," he said.

Dia menyampaikan, pengawasan dilakukan melalui Laporan Realisasi Penggunaan Dana yang wajib disampaikan oleh pemerintah daerah setiap enam bulan sekali.

Menurutnya, LRPD ini harus memuat rincian penggunaan dana dan akan menjadi dasar OJK dalam menilai apakah dana telah digunakan sesuai tujuan.

"OJK memanfaatkan LRPD ini untuk melakukan pengawasan apakah dana dimaksud telah digunakan sesuai tujuan yang telah diungkapkan dalam prospektus. Dalam proses pengawasan terkait dengan penggunaan dana hasil penerbitan Obda/Sukda, OJK juga dapat berkoordinasi dengan Kementerian Keuangan," tandasnya.

He conveyed that supervision was carried out through a Realization Report on the Use of Funds that must be submitted by local governments every six months.

According to him, this LRPD must contain details of the use of funds and will be the basis for OJK in assessing whether funds have been used according to their objectives.

"OJK utilizes this LRPD to supervise whether the funds in question have been used according to the objectives that have been disclosed in the prospectus. In the monitoring process related to the use of funds resulting from the issuance of Obda/Sucda, OJK can also coordinate with the Ministry of Finance," he said.