Jordan's public debt: challenges and opportunities for reform

Dr. Jafar Hassan's Cabinet has inherited a heavy financial burden represented by the public debt crisis. Today, the Jordanian economy is at a critical turning point, with public debt reaching approximately JD42 billion, according to reports from the Ministry of Finance. At the same time, the government aims to boost economic growth and increase job opportunities, in line with the Economic Modernisation Vision (EMV). This phase presents a significant challenge to transition the economy from slow growth to a sustainable growth model.

The rising public debt is one of the biggest challenges facing Jordan’s economy for several reasons. A large portion of government revenues is allocated to servicing the debt and limiting the ability to finance high-impact development projects. In 2024, the interest on public debt exceeded JD2.9 billion, inherited from the previous government. This reduced spending on education, healthcare, infrastructure, and most initiatives of the EMV. The government is fully aware of reality, and is consequently working on improving public financial management and increasing local revenues within a tight fiscal space.

In addition to expanding economic activities and increasing total revenues, there are two key indicators to assess performance in ensuring public debt sustainability. First, the economic growth rate should be greater than the growth rate of public debt, and secondly the nominal growth of GDP should exceed the nominal interest rate on borrowing. Therefore, the focus should be on strategies to increase revenues, boost GDP growth to outpace the growth of debt, and secure borrowing at the lowest possible interest rates.

To address these challenges, the government announced a series of reforms to enhance revenue collection and increase the contribution of productive sectors to the economy. These reforms include tax settlements, customs fees, exemptions for real estate registration and vehicle licensing, and some exemptions on service exports.

International organisations, such as the World Bank, project that Jordan’s economy will grow by 2.5 per cent in 2025, supported by structural reforms and improvements in the business environment. These expectations are driven by new investment projects, with approximately JD1.6 billion allocated in next year’s budget to sectors like renewable energy and technology. Tourism and industry remain key pillars for stimulating economic growth under the EMV, which the government is keen to implement effectively. By investing in technology and renewable energy, Jordan can diversify its income sources and increase these sectors' contribution to GDP.

The government also plans to gradually reduce the budget deficit from 5.4 per cent of GDP in 2024 to about 4.8 per cent in 2025. However, success depends on Jordan's ability to implement effective reform policies to tackle deep-rooted challenges such as unemployment, which remains high at 21.4 per cent.

To achieve financial sustainability, Jordan must adopt long-term strategies to enhance productivity and diversify the economy. These strategies include boosting exports, developing manufacturing industries, and focusing on innovation and technology. The government and private sector must work together to create a stable and sustainable economic environment that ensures citizens’ well-being and economic performance.

While public debt poses a significant challenge, ongoing reforms and the potential of local sectors offer hope for sustainable economic transformation. Jordan has long-term strategies under the EMV that focus on increasing productivity, attracting investments, and developing vital sectors such as tourism and industry. Success in achieving this transformation requires joint efforts between the government and private sector to build a resilient economy that ensures financial sustainability and lasting prosperity for Jordanians.

Raad Mahmoud Al-Tal is the current chairman of the Economics Department at the University of Jordan. He holds a PhD in economics from the University of Aberdeen in the United Kingdom and specializes in macroeconomic and monetary economics and economic modeling.