Real debt management: How did the government succeed in curbing interest costs?

Discussions of public debt in Jordan tend to focus on two figures: the total amount owed and its ratio to gross domestic product. Those numbers matter, but they tell only part of the story. Public debt is not simply a balance that accumulates from year to year. It is a financial portfolio with a cost, a set of maturities, interest rates, funding sources and exposure to global markets and exchange rates. The more precise question is not how much Jordan owes, but how much that debt costs the treasury, when it comes due, and at what rate it gets refinanced. Data from the government’s public finance bulletin shows a notable shift on that front in 2025.

Interest Costs Grow, But Far More Slowly
The annual increase in interest payments on domestic and external loans fell sharply, from 396 million dinars in 2024 to 90.9 million dinars in 2025, according to the bulletin. That marks a drop of roughly 305 million dinars, or about 77 percent, in the year-on-year increase in Jordan’s interest bill.

Some of that improvement reflects falling global interest rates, which created more favorable conditions for refinancing and new borrowing. But that explanation is incomplete. Lower global rates do not immediately apply to Jordan’s entire debt stock, since a portion of it was contracted earlier at higher fixed rates and longer maturities that are not yet due for refinancing.

Much of the improvement instead reflects active government management, including refinancing debt ahead of maturity and replacing higher-cost loans with concessional financing on longer terms.

This does not mean Jordan’s total interest bill fell. It rose from about 1.75 billion dinars in 2023 to 2.15 billion dinars in 2024, then to about 2.24 billion dinars in 2025. The more significant shift lies in the pace of that growth: the interest bill’s growth rate slowed from 22.6 percent in 2024 to just 4.2 percent in 2025.

In other words, the government did not stop the cost of debt from rising, but it broke the sharp acceleration in that cost, which has been one of the main sources of pressure on the state budget.

Domestic Debt Shows the Clearest Improvement
The shift is most visible in domestic debt. Growth in interest payments on domestic debt slowed from 21.3 percent in 2024 to 2.5 percent in 2025, while the annual increase in those payments fell from 223.7 million dinars to just 32.4 million dinars, a decline of about 86 percent.

That reflects improved management of domestic debt instruments, which helped curb the growth in servicing costs and reduce refinancing risk. The objective has shifted from simply covering government funding needs to achieving a more efficient balance of cost, risk and maturity.

A similar pattern emerged in external debt. The growth rate of external debt interest payments slowed from 24.4 percent in 2024 to 6.7 percent in 2025, while the annual increase fell from 172.3 million dinars to 58.5 million dinars. The improvement was not confined to domestic debt or a single financing instrument, but extended across different components of the debt portfolio.

That result carries added weight given regional conditions during the period: rising uncertainty and geopolitical risk in the region typically push up risk premiums and sovereign borrowing costs, particularly for countries near conflict zones.

Proactive management of maturities, diversification of concessional funding sources, improved borrowing terms and a shift toward development loans from Arab funds and international institutions helped limit the impact of those pressures on debt servicing in 2025.

Eurobonds: From Borrowing to Cost Engineering
Jordan’s handling of its eurobond obligations illustrates this shift most clearly, moving from simply securing financing to actively managing its cost. A $1 billion eurobond issued in 2015 and 2020 was retired in June 2025 through a package of concessional financing that the government said saves the treasury about $40 million a year.

A second $1 billion eurobond, issued in 2015, was retired in January 2026 through concessional funding from multiple sources.The significance lies not just in the value of the bonds retired, but in the shift in approach.

International capital markets are no longer the default source the government turns to at every maturity. They have become one tool among several in a broader financing portfolio that includes international financial institutions, Arab funds and concessional development financing, marking a shift from securing financing to managing its cost.

2027 Will Test the Strategy
The next test comes in January 2027, when a $1 billion eurobond matures. The government is working to cover that maturity through a package of concessional financing expected to carry an average interest rate of no more than 4.5 percent, compared with about 6 percent on the eurobond maturing in early 2027.

If that scenario holds, the theoretical annual savings would total about $15 million. The figure illustrates why interest-rate management has become central to debt strategy: cutting the rate on a $1 billion facility by a single percentage point translates into roughly $10 million in annual savings.

Compounded over several years, differences of that size add up to sums that can ease pressure on the budget and free up room for spending on sectors such as health, education and transport.

A New Fiscal Space
The value of these policies shows up not only in slower growth in interest payments, but in the fiscal space they create. The annual increase in interest payments on domestic and external debt, measured as a share of GDP, fell from about 0.95 percent in 2024 to about 0.21 percent in 2025, freeing up more room for economic growth that would otherwise have gone toward servicing additional debt, an important dynamic for improving Jordan’s debt-to-GDP trajectory over the medium term.

The increase in total interest payments as a share of domestic revenue fell from 4.53 percent in 2024 to 0.98 percent in 2025, meaning a larger share of revenue growth can now go toward public services and capital spending rather than debt service, a dynamic economists refer to as expanding fiscal space.

The increase in interest payments as a share of foreign reserves fell from 2.66 percent in 2024 to 0.5 percent in 2025, easing pressure on reserves and offering a wider safety margin for the exchange rate. And the increase in interest payments as a share of goods and services exports fell from 2.43 percent in 2024 to 0.5 percent, easing pressure on the balance of payments. All four indicators moved in the same direction: relative to GDP, domestic revenue, foreign reserves and exports.

Managing Debt Is Not the Same as Reducing It
Any fair assessment of this record needs to separate debt management from debt reduction. Better management does not mean the debt problem has been solved.

Refinancing on improved terms lowers borrowing costs but does not eliminate the principal owed, and concessional loans ease the interest burden without preventing new debt from accumulating if the fiscal deficit continues to generate additional financing needs.

Debt management, in that sense, is only half the equation. The other half is the government’s ability to reduce the primary deficit, the gap between revenue and spending excluding interest payments, and to lower its need for new borrowing. That is where debt management intersects with broader economic reform: the ultimate goal should not be securing cheaper financing alone, but reducing the need for financing in the first place.

2025 as a Turning Point
The results recorded in 2025 mark a qualitative shift in how Jordan manages its public debt. The government curbed the sharp rise in interest costs, improved the structure of its financing, diversified its funding sources, and expanded its use of concessional, longer-term financing, strengthening the state’s ability to manage upcoming maturities and easing pressure on the budget.

That progress is notable given it occurred against a backdrop of elevated regional and global uncertainty and higher financing costs, underscoring the effectiveness of proactive debt management and the government’s ability to capture available financing opportunities on better terms.

The next phase will focus on building on these results by continuing to lower financing costs, extending maturities, reducing refinancing risk, and supporting economic growth and domestic revenue.

As these policies continue, improvement in Jordan’s debt-to-GDP ratio is expected to come gradually, as a result of combining efficient debt management with economic growth and fiscal discipline, rather than as the sole measure of successful debt management.

The progress made in 2025 provides a foundation for a more sustainable phase of public finance management, reflecting a shift from simply meeting financing needs to managing the cost, risk and maturity profile of debt more efficiently.

Writen by  Salama Al-Darawi
Government of Jordan public finance bulletin, via Al-Ghad.