Public Debt in Jordan: The Roots of the Crisis and Solutions - Ahmed Awad
Ahmad Awad
Public Debt in Jordan: The Roots of the Crisis and Solutions - Ahmed Awad
Jordan has been witnessing a worrying trend in public debt growth for years. Total debt rose from approximately 29.7 billion dinars in 2019 to 43.5 billion dinars in 2024, equivalent to 117.2 percent of GDP. These figures do not reflect a temporary situation as much as they embody a structural crisis that has accumulated over many years, pushing the country into an intertwined economic, social, and political impasse. The weakness of the productive base, the successive governments' reliance on borrowing and foreign aid, and an unfair tax system have left the government stuck in a vicious cycle of deficits, debt, and increasing debt servicing, which consumes a quarter of public revenues. Meanwhile, the growth rate does not exceed 2.5 percent and unemployment remains stubbornly high, reaching chronic levels of 22 percent, exceeding 40 percent among young people.
The fundamental problem is that the Jordanian economy has been unable to build a solid productive base capable of generating sustainable growth. The industrial and agricultural sectors have lost much of their competitiveness, while the low-value-added services sector dominates, and financing for small and medium-sized enterprises (SMEs) suffers from a severe shortage. In addition to successive external crises, from the global financial crisis to the repercussions of the Russian-Ukrainian war, the genocidal war in Gaza and the expansion of settlements in the West Bank, these crises have swept across the Jordanian economy like successive storms, impacting trade, tourism, energy and food costs, and exacerbating internal fragility.
The tax system has become a heavy burden on ordinary citizens. More than two-thirds of revenues come from indirect taxes, most notably the general sales tax and lump-sum taxes on fuel, telecommunications, and tobacco. Meanwhile, income tax remains limited in its progressivity and ineffective in collecting a fair share from high-income earners and large corporations. This reality not only exacerbates pressure on the middle and poor classes, but also weakens purchasing power and keeps economic growth sluggish. With the persistent chronic budget deficit, which has averaged 7.4 percent of GDP in recent years, governments have resorted to borrowing to cover expenses. Debt service has doubled alarmingly, from 1.1 billion dinars in 2019 to nearly 2 billion dinars in 2024, with a projected increase to 2.2 billion dinars in 2025. This means that the government is paying interest on its debt in a single year, roughly equivalent to its total spending on the education and health sectors, a very serious indicator of the imbalance of public finance priorities.
The dilemma does not stop at the numbers; it extends to the conditionality associated with international aid and loans. Many of these financial inflows are conditional on austerity measures, from raising indirect taxes to reducing subsidies and curtailing current spending. With the dinar pegged to the dollar, Jordan finds itself at the mercy of US monetary policy, as higher interest rates in Washington increase the cost of borrowing and place additional pressure on reserves. This doubles the external debt burden and increases the fragility of public finances. The social repercussions of these policies have been severe. Fiscal austerity measures have not been accompanied by fair reforms, and high unemployment and stagnant wages have widened the gap between social classes. Many Jordanians have come to rely on the informal economy for their livelihoods, while the quality of some essential public services, particularly education, healthcare, and housing, has declined, and public confidence in institutions has waned. Thus, public debt is not just a financial problem, but a societal and political issue that affects long-term stability.
Addressing this crisis requires rebuilding the fiscal and social contract on new foundations. This begins with a fair tax reform that reduces reliance on indirect taxes, makes income tax more progressive, and taxes wealth and large assets. This will provide sustainable revenues and redistribute the burden more equitably. Furthermore, tax evasion must be combated and the tax base broadened by gradually and systematically integrating the informal sector. Implementing an electronic invoicing system this year is an important step in this regard, simplifying procedures and encouraging compliance. On the spending side, it is necessary to shift from unproductive current spending to investment in projects that create added value and job opportunities, such as green manufacturing, modern agriculture, supply chains, and logistics. These are areas that can drive growth if the necessary investments are made. Education and health must also be reconsidered as essential investments, ensuring that these sectors do not become areas for silent privatization that deprive vulnerable groups of their basic rights.
As for the private sector, policies are needed to enhance its productive role, away from rent-seeking and speculation. Credit incentives directed at small and medium-sized enterprises, the development of alternative financing tools such as the corporate bond market and crowdfunding, and a review of banking policies that favor government lending at the expense of productive projects are all essential steps. In parallel, active labor market policies are needed that link training to actual demand and push for higher wages and improved labor standards, stimulating productivity and local demand.
In conclusion, Jordan's debt crisis is not inevitable, but rather the result of choices and policies that can be corrected. What is required is to restore consideration for tax justice, direct spending toward real investments, stimulate the productive private sector, and enhance transparency and accountability. This is not an easy recipe, but it is the only way to break the vicious cycle and transform debt from a burden weighing down the present into a tool that supports development and opens the way to a better future.
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