amman: The government's public debt management policies during 2025 demonstrated a significant shift in reducing debt costs, creating fiscal space that allowed for the allocation of available resources to public spending priorities, primarily essential services and development projects.
According to Jordan News Agency, this shift reflects the government's efforts to curb the growth of domestic and foreign loan interest payments, thereby easing pressure on the general budget and providing greater scope for redirecting resources towards priorities that directly impact Jordanians' lives. This includes supporting capital expenditures and implementing government projects and initiatives in key sectors such as education, health, and transport.
Maher Mahrouq, Director General of the Association of Banks in Jordan, told the Jordan News Agency (Petra) that the decrease in public debt servicing costs represents a positive development in debt management. Mahrouq said that the decrease is due to lower interest rates, the refinancing of some obligations at reduced costs and a shift towards international and Arab institutions that offer financing with better terms and interest rates, rather than relying more heavily on the commercial market.
He explained that the importance of reducing debt servicing costs extends beyond the savings in interest payments. It impacts budget allocations, as lower debt servicing costs allow the government to reprioritise spending and redirect a portion of allocations to other areas, including capital and investment expenditures. He added that the savings can be directed towards projects and investments that boost productivity, support economic activity, and create jobs. He pointed out that the cumulative impact of such investments can exceed the value of the direct savings.
The annual increase in domestic and foreign loan interest payments decreased from JD396 million in 2024 to JD90.9 million in 2025, a reduction of approximately JD305 million, or 77 per cent. The growth rate of the interest bill fell from 22.6 per cent to 4.2 per cent. This means that the additional resources the treasury needs annually to address rising debt costs are now less, providing greater flexibility in managing budget allocations and directing them towards spending that directly impacts public services and projects.
The significance of this shift becomes clear when examining domestic and external debt. The increase in domestic debt interest payments decreased from JD223.7 million to JD32.4 million, and its growth rate dropped from 21.3 per cent to 2.5 per cent. Similarly, the increase in external debt interest payments decreased from JD172.3 million to JD58.5 million, and its growth rate fell from 24.4 per cent to 6.7 per cent.
For his part, banking expert Mufleh Aqel told Petra News Agency that the decrease in debt servicing costs reflects improved debt management. He urged distinguishing between debt servicing and the principal amount of the debt itself, explaining that a decrease in interest rates does not automatically translate to a decrease in the principal. Aqel pointed out 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 provide financing on more favourable terms.
He indicated that the approach reduces borrowing costs compared to relying on commercial markets. He explained that the savings resulting from lower service costs could be redirected within the budget towards capital and investment expenditures, including projects that enhance productivity and support economic activity. However, using these savings to increase borrowed spending could perpetuate the same debt problem.
Regarding the Eurobond maturity in 2027, Aqel called for early preparation and selecting the least expensive source of financing. He noted that resorting to international and Arab institutions with better terms is a suitable option given the high cost of borrowing in the markets.
The annual increase in interest payments as a percentage of GDP decreased from 0.95 per cent in 2024 to 0.21 per cent in 2025, and its ratio to domestic revenues decreased from 4.53 per cent to 0.98 per cent. This strengthens the budget's capacity to absorb capital spending and allocate more resources to projects needed by the service sectors.
A $1 billion Eurobond was redeemed in June 2025 through concessional financing, which, according to the government, saved approximately $40 million annually. Another bond of the same value was redeemed in January 2026 through concessional financing. The maturity of a $1 billion bond in January 2027 presents a new test, as data indicates the possibility of refinancing it at an average interest rate not exceeding 4.5 per cent, compared to approximately 6 per cent on the maturing bond. This translates to theoretical savings of around $15 million annually.
Omar Gharaibeh, a professor of finance at Al al-Bayt University, stated that managing public debt in Jordan is no longer solely about the size of the debt, but about the cost of servicing it and how to manage it without encroaching on development spending. Gharaibeh added that this sharp decline in the rate of increase in debt costs, from over 22 per cent to less than 5 per cent, represents a significant indicator of improved debt management, especially with the restructuring of some obligations, the extension of their maturities and the utilisation of lower-cost financing.
He explained that replacing high-cost obligations with concessional financing achieved annual savings of nearly $40 million in one refinancing operation. He said that the real test lies not in achieving savings, but in how the financial space freed up by lower debt servicing costs is utilised. He added that directing these savings toward capital spending and productive projects can transform debt management from a cost-cutting tool into a tool for supporting growth and serving Jordanians.
He added that the 20% increase in actual capital expenditures in 2025, with an implementation rate of approximately 95% compared to 68% in 2024, represents a significant development. The key is not simply allocating funds, but rather the government's ability to transform them into productive projects and assets. Gharaibeh stated that priority should be given to directing available resources toward productive infrastructure, particularly water, energy, transport and digitalisation. He said the direction would increase productivity, reduce import costs, support exports and attract investments.
He added that the savings resulting from improved debt management can contribute to financing projects that serve Jordanians without resorting to new borrowing, provided that this is accompanied by controlling current expenditures.