Navigating Fiscal Hurdles: Harmonizing Jordan’s Budget for 2025 with Economic Modernization Vision Goals

A Strategic Framework for Fiscal Responsibility
ALTAJ NEWS – Written by Dr. Wassel Al-Mashagbeh
Jordan’s 2025 budget reflects a strategic alignment with the Economic Modernization Vision (EMV), emphasizing fiscal discipline alongside reforms to stimulate economic growth and employment. Moderate inflation and stable foreign reserves form a foundation of economic resilience, while enhanced tax collection efforts bolster domestic revenue generation. Despite significant challenges in sustaining revenue growth, the budget prioritizes essential investments in education and healthcare, aiming to strike a balance between fiscal responsibility and societal needs. This comprehensive approach seeks to foster sustainable economic development and improve social welfare outcomes.
Jordan’s 2025 budget underscores the government’s commitment to fiscal prudence as it seeks to advance the ambitious goals of the EMV. As both a roadmap for economic recovery and a framework for sustainable growth, the budget addresses entrenched fiscal challenges while aiming to strengthen public welfare systems. With a projected fiscal deficit of JD 2.278 billion, the persistent gap between revenues and expenditures highlights the urgency of structural reforms. The anticipated real GDP growth rate of 2.5%, as projected by the IMF, poses an additional challenge. This figure falls significantly short of the EMV’s ambitious target of 5.6% annually, underscoring the need for decisive policy interventions. This divergence underscores the critical need for policy alignment to close structural gaps and achieve modernization objectives.
Revenue Dynamics: Addressing Sustainability Gaps
The government projects total revenues of JD 10.233 billion for 2025, comprising JD 9.498 billion from domestic sources and JD 734 million from foreign grants. Tax revenues account for JD 7.1 billion, or approximately 75% of domestic revenues. Indirect taxation, particularly the General Sales Tax (GST), continues to dominate, contributing nearly 68% of total tax revenues. While this reliance on indirect taxes generates significant revenue, its regressive nature disproportionately burdens lower-income households. Furthermore, it leaves the fiscal system vulnerable to economic fluctuations and structural shifts in consumption patterns. Non-tax revenues are expected to contribute JD 2.4 billion, or 25% of domestic revenues, through sources such as fees, dividends from state-owned enterprises, and royalties from natural resources. This modest share reflects a narrow revenue base, signaling the need for diversification. Enhanced monetization of natural resources, commercialization of state assets, and improved returns from sovereign wealth investments could supplement domestic revenues and bolster fiscal sustainability.
Expenditure Trends: Navigating Competing Priorities
The 2025 budget allocates JD 12.51 billion to total expenditures, marking a 16.5% increase compared to the previous fiscal year. Current expenditures dominate, totaling JD 11.04 billion, or 88% of overall spending. This reflects the fiscal strain imposed by a large public sector, which employs over 218,000 civil servants. Compensation for public employees, including salaries and benefits, accounts for a significant portion of current expenditures, constraining the government’s ability to channel funds toward developmental priorities. Public sector wages, totaling over JD 5 billion, represent a significant fiscal challenge, contributing to a projected primary deficit of 2% of GDP in 2025, down from 2.9% in 2024. This heavy reliance on foreign aid to cover budgetary gaps underscores the urgency of broadening the tax base, enhancing revenue collection, and rationalizing expenditure to ensure fiscal sustainability.
1. Debt Servicing
Debt servicing is another major component of current expenditures, with JD 2.2 billion earmarked for interest payments in 2025. Rising debt obligations continue to constrain fiscal flexibility, underscoring the importance of reducing reliance on borrowing and implementing measures to stabilize public finances.
2. Capital Expenditures: Limited Room for Growth
Capital expenditures are allocated JD 1.469 billion, accounting for 12% of total spending. This represents a 16.6% increase from the previous year, signaling a commitment to infrastructure development. Key projects include the National Water Carrier Initiative and the proposed railway linking Aqaba Port to mining sites in the Dead Sea region. However, the limited share of the budget allocated to capital investments highlights the government’s struggle to balance infrastructure development with the financial demands of maintaining its sizable public sector.
Policy Recommendations: Toward Fiscal Sustainability
1. Enhancing Revenue Streams
Achieving fiscal sustainability necessitates a comprehensive approach to enhancing revenue generation. Central to this strategy is the implementation of tax reforms that broaden the tax base by incorporating underutilized sectors such as the digital economy and informal markets. These sectors represent significant untapped potential for revenue mobilization. The digital economy encompasses online platforms, e-commerce, digital services, and other technology-driven activities, many of which currently evade effective taxation due to regulatory gaps or exploitation of tax loopholes. Similarly, the informal economy, comprising unregistered businesses and unregulated economic activities, operates largely outside the formal tax system, limiting government revenue and distorting fair market competition.
Reforms should also shift the fiscal burden toward equitable direct taxes, which are levied on income, profits, and wealth based on the taxpayer’s ability to pay. This progressive approach ensures that higher-income individuals and larger corporations contribute a proportionally larger share, fostering fairness and social equity. To achieve these goals, investments in advanced digital tax systems and enhanced audit practices are essential. Such measures can improve compliance, curtail tax evasion, and ensure a more efficient revenue generation process, enabling governments to harness emerging economic activities while reinforcing fiscal resilience and equity.
2. Rationalizing Expenditures
A comprehensive review of current expenditures is indispensable to achieving fiscal sustainability and optimizing resource allocation. Structural reforms must be implemented to effectively manage the size of the public sector. One such reform is the adoption of a “two-for-one” hiring policy, wherein two retiring employees are replaced by a single new hire. This approach can gradually reduce the fiscal burden associated with public sector wages while maintaining service quality. In addition, freezing non-essential hiring represents a prudent step in controlling costs and ensuring that limited fiscal resources are deployed efficiently. However, a degree of flexibility is crucial, an exemption to the hiring freeze may be granted if the relevant minister provides a compelling justification for the recruitment of an essential employee. This ensures that critical public services remain unaffected while safeguarding fiscal discipline (i.e., finance, customs, health, tax, budget).
Leveraging technology to enhance productivity and streamline operations offers further potential for cost savings without compromising the quality of public service delivery. Redirecting resources from recurrent expenditures toward high-impact capital investments is equally vital. Sectors such as education, healthcare, ITC and tourism should be prioritized, given their potential to drive economic diversification and foster sustainable, long-term growth.
Furthermore, the expansion of public-private partnerships (PPPs) can help alleviate fiscal pressures by mobilizing private-sector funding and expertise. This collaborative approach can accelerate the development of essential infrastructure projects while reducing the strain on public finances, thereby advancing the government’s broader economic modernization agenda.
3. Improving Debt Management
To curb the growing debt burden, the government must implement a robust debt management strategy. This includes prioritizing concessional loans over commercial borrowing and leveraging domestic savings through innovative financial instruments. Debt restructuring and renegotiation, where feasible, can also provide immediate fiscal relief. Concessional loans, which are offered at lower interest rates and more favorable terms compared to commercial loans, could ease the debt burden while supporting critical development projects.
4. Promoting Transparency and Accountability
Strengthening oversight mechanisms and fostering citizen engagement in the budgetary process are critical for enhancing transparency and accountability. A transparent fiscal framework builds public trust, ensuring broad-based support for reforms and minimizing resistance to necessary but potentially unpopular measures.
Conclusion: Aligning Fiscal Policy with Economic Modernization Vision Goals
Jordan’s 2025 budget represents a pivotal opportunity to harmonize fiscal policy with the transformative goals of the EMV. While the projected fiscal deficit and modest growth forecast reveal deep-seated structural challenges, they also highlight the potential for bold and decisive reforms. By addressing the inefficiencies of an oversized public sector, reallocating resources toward impactful investments, and diversifying revenue streams, Jordan can build a resilient and inclusive economy. These reforms, underpinned by transparency and public confidence, will empower the government to fulfill its commitment to sustainable development and improved quality of life for all citizens. Successfully navigating these fiscal hurdles will not only stabilize the economy but also pave the way for a future of shared prosperity, ensuring the EMV’s vision is realized for future generations.