How Jordan is Managing Public Debt

Reducing public debt and it is cost on the economy can be achieved in three main ways. First, by improving economic growth. When the economy grows, production increases and government revenues go up. Second, by reducing the budget deficit. The deficit, meaning the gap between government spending and revenues, is the main reason governments borrow money. So, reducing the deficit helps limit the need for more debt. Third, by replacing high-interest debt with cheaper loans. This means borrowing at lower interest rates, which reduces the overall cost of debt on the government.

The Jordanian government has already started to take steps in this direction. Usually, governments borrow by issuing bonds and treasury bills, which come with interest payments. In 2025, Jordan will spend about JD2.2 billion on interest payments, which is 17.6 per cent of all government spending. This creates a heavy burden, especially on capital spending, which is only JD1.468 billion this year, just 11.7 per cent of the total budget.

To deal with this challenge, the government looked at ways to manage debt that is due soon. In 2025, Jordan must repay $1 billion in Eurobonds, with payments due on June 29 and July 7. Another Eurobond is due in 2026. The usual solution would be to borrow again from international markets, but interest rates are high, around 7.75 per cent, which would only add to the cost of debt and increase the pressure on the economy and budget.

Instead, the government found lower-cost financing options. Over the past five months, it secured concessional loans from friendly countries and issued new financial instruments, such as Islamic Sukuk (an Islamic financial certificate), with lower interest rates. This allowed the government to use extra liquidity in Islamic banks and create new, cheaper funding methods. These steps helped reduce the cost of repaying the 2025 Eurobond by 40 per cent, saving around $40 million each year. Over five years, this means savings of about $200 million.

Lowering the interest rate by around 40 per cent, or about three percentage points, has eased pressure on the government’s regular spending. This has freed up funds that can now be used for development projects and to support economic growth. It also improved investor and international confidence in Jordan’s ability to manage its public debt in a responsible and sustainable way.

Signs of progress are already visible. By the end of 2024, Jordan’s total public debt had fallen by 1 per cent, reaching JD44.161 billion. The debt-to-GDP ratio dropped from 118 per cent in November to 116.8 per cent by year-end. Additionally, the debt owed by the government to the Social Security Investment Fund decreased by 3.2 per cent, reaching JD9.9 billion.

Now, the goal is to keep growing the economy at a pace that matches or exceeds the rate at which debt is increasing. With smart financial decisions, better use of available funding tools, and continued efforts to support growth, which reached 2.7 per cent in the last quarter of 2024, Jordan has a real opportunity to move forward and break out of the long-standing economic stagnation it has faced.

Raad Mahmoud Al Tal is head of the Economics Department – University of Jordan-  r.tal@ju.edu.jo