AMMAN — Government efforts to manage Jordan’s public debt in 2025 helped slow the growth of debt-servicing costs, creating additional fiscal space for spending on essential services and development projects, officials and economic experts said.

 

The annual increase in interest payments on domestic and external loans fell sharply to JD90.9 million in 2025, from JD396 million in 2024, a decline of nearly JD305 million, or 77 per cent, the Jordan News Agency, Petra, reported.

 

As a result, the growth rate of the government’s interest bill dropped to 4.2 per cent in 2025, from 22.6 per cent a year earlier, reducing the additional resources needed by the Treasury to meet rising debt-servicing costs.

 

In remarks to Petra, economists explained that the lower cost of servicing the debt has given the government greater flexibility to redirect budget allocations towards capital and investment spending, including projects in education, health, transportation and other key sectors.

 

Maher Mahrouq, General Manager of the Association of Banks in Jordan, described the decline in debt-servicing costs as a positive development in public debt management.

 

He attributed the improvement to lower interest rates, the refinancing of some obligations at lower costs and greater reliance on international and Arab institutions that offer financing on more favorable terms than commercial markets.

 

“The significance of lower debt-servicing costs extends beyond the interest savings themselves,” Mahrouq said, adding that the lower payments ease pressure on the budget and allow the government to reprioritise spending, including by allocating more resources to capital and investment projects.

 

Such savings can be directed towards projects that raise productivity, support economic activity and create jobs, he said, adding that the longer-term economic impact of investment could exceed the value of the immediate savings, he added.

 

Domestic and external debt

 

The improvement was recorded across both domestic and external debt.

 

The annual increase in interest payments on domestic debt fell to JD32.4 million in 2025, from JD223.7 million in 2024, while the growth rate declined from 21.3 per cent to 2.5 per cent, according to Petra.

 

For external debt, the annual increase in interest payments fell to JD58.5 million, from JD172.3 million, with the growth rate dropping from 24.4 per cent to 6.7 per cent.

 

Banking expert Mufleh Aqel told Petra that the decline in debt-servicing costs reflects an improvement in debt management, but stressed the need to distinguish between debt servicing and the size of the debt itself.

 

“A decline in interest payments does not automatically mean that the principal amount of debt has decreased,” he explained.

 

Aqel noted that the government benefited from lower interest rates and the refinancing of some obligations at lower costs, as well as from turning to international and Arab institutions that offer financing on better terms. “This approach reduces borrowing costs compared with relying on commercial markets.”

 

He explained that the savings resulting from lower debt-servicing costs can be redirected within the budget toward capital and investment expenditures, including projects that enhance productivity and support economic activity. However, using those savings to increase spending financed through borrowing could recreate the debt problem itself.

 

Preparing for 2027 Eurobond maturity

 

Aqel also stressed the importance of early preparations for the $1 billion Eurobond maturing in January 2027, saying the government should select the least costly financing option.

 

“Turning to international and Arab institutions for financing on more favorable terms could be an appropriate option given the relatively high cost of borrowing in commercial markets.”

 

Jordan retired a $1 billion Eurobond in June 2025 using concessional financing. The government said at the time that the refinancing would save approximately $40 million annually.

 

A second $1 billion bond was retired in January 2026 through concessional financing.

 

The 2027 maturity will present another test of the government's debt-management strategy. Available estimates suggest the bond could potentially be refinanced at an average interest rate of no more than 4.5 per cent, compared with around 6 percent on the maturing bond, implying theoretical annual savings of approximately $15 million.

 

Fiscal space and capital spending

 

The decline in debt-service costs has also improved the government's fiscal position relative to the size of the economy and its domestic revenues, Petra said.

 

The annual increase in interest payments fell from 0.95 per cent of GDP in 2024 to 0.21 per cent in 2025, while its share of domestic revenues dropped from 4.53 per cent to 0.98 per cent.

 

Omar Gharaibeh, professor of Finance at Al al-Bayt University, said that the public debt management should no longer be viewed solely in terms of the size of the debt, but also in terms of the cost of servicing it and the government's ability to prevent debt payments from crowding out development spending.

 

He described the decline in the growth rate of debt-servicing costs, from more than 22 per cent to less than 5 per cent, as an important indicator of improved debt management.

 

“The restructuring of some obligations, extension of maturities and use of lower-cost financing have contributed to the improvement,” Gharaibeh said, citing the replacement of high-cost obligations with concessional financing that generated annual savings of nearly $40 million in one refinancing operation.

 

However, he said the real test would be how the government uses the fiscal space created by the lower debt-service burden.

 

“Directing these savings toward capital spending and productive projects could turn debt management from a tool for reducing costs into a tool for supporting growth and improving services for citizens.”

 

Actual capital expenditure rose 20 per cent in 2025, while the execution rate reached approximately 95 percent, up from 68 percent in 2024, Gharaibeh said.

 

The key issue, he explained, is not simply allocating funds but ensuring that those allocations are converted into productive projects and assets.

 

He recommended prioritising productive infrastructure, particularly water, energy, transportation and digitalization, to increase productivity, reduce import costs, support exports and attract investment.

 

“Savings generated through improved debt management could help finance projects that benefit citizens without requiring new borrowing, provided that this is accompanied by tighter control over current expenditures.”