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Jordan’s Ratings Upgraded; Outlook Revised to Stable
(MENAFN- Capital Intelligence Ltd) Rating Action
Capital Intelligence Ratings (CI Ratings or CI) today announced that it has upgraded Jordan’s Long-Term Foreign Currency Rating (LT FCR) and LT Local Currency Rating (LT LCR) to ‘BB-’, from ‘B+’. At the same time, CI Ratings has affirmed the sovereign’s Short-Term (ST) FCR and ST LCR at ‘B’. The Outlook on the ratings has been revised to Stable from Positive.
Rating Drivers
The upgrade of the ratings reflects the demonstrated resilience of the Jordanian Economy and its gradually improving capacity to withstand external adversities despite the challenging geopolitical landscape. These developments are underpinned by the government’s prudent macroeconomic policies, including ongoing fiscal consolidation efforts aimed at reining in the budget deficit and lowering public debt over the medium term. In addition, external liquidity has improved, supported by a reduction in the current account deficit and an increase in the foreign reserve buffer.
The ratings continue to be supported by the availability of financial assistance from multilateral lenders and external donors – particularly the IMF and US – as well as moderate external government debt, a resilient funding base, and a relatively sound banking sector.
International liquidity remains moderate, albeit improving, with the central bank’s stock of FX reserves increasing to USD18.6bn in March 2024, compared to USD17.3bn in December 2022. Coverage terms also improved, with the country’s reserve buffer covering around 91.9% of short-term debt on a remaining maturity basis in 2024, up from 89.3% in 2023. Non-resident deposits account for a large portion of short-term external debt. CI notes that these deposits have proven relatively stable over time and are mostly linked to Jordanian expatriates working abroad. Reserve coverage of short-term external debt rises to a more comfortable 2.6 times if these deposits are excluded.
Although the country’s chronic current account deficit continues to constrain the ratings, it declined to 3.5% of GDP in 2023, from 7.9% in 2022, reflecting an increase in services receipts and primary income and a drop in imports. Moving forward, CI expects the current account deficit to average 3.8% in 2024-26, reflecting a recovery in exports and robust services’ receipts. CI views the current and projected levels of external indebtedness as moderate-to-high, with gross external debt declining to 137.3% of current account receipts in 2023, compared to 144.2% in 2022.
External risk factors remain very high, reflecting the uncertainty surrounding the duration of the war in Gaza and the risk of regional escalation. Notwithstanding these developments, Jordan enjoys a record of weathering external shocks while maintaining economic and political stability. Despite the spillovers of the war in Gaza, portfolio investments and FDI increased by 1.4% in Q4 23, compared to the same quarter in 2022, while tourism receipts declined slightly to JOD1.31bn in Q4 23, compared to JOD1.33bn in Q4 22.
Reform progress has continued despite external adversities. The government has implemented several fiscal consolidation measures aimed at reining in the budget deficit and reducing debt levels. These have included gradual increases in water tariffs, the rationalisation of public sector and social spending, and the strengthening of tax administration and collection in a bid to broaden the tax base. While these reforms have helped to reduce the budget’s reliance on foreign grants, CI continues to consider the availability of financial assistance from external donors and multilaterals as a supporting factor for the ratings as it partially mitigates government liquidity risks stemming from moderate-to-high gross financing needs (18.2% of GDP in 2024).
Fiscal strength is moderately weak. The central government budget deficit – including grants – increased slightly to 5.1% of GDP in 2023, from 4.5% in 2022, due to slower revenue growth and higher interest expense. CI expects the central government budget deficit to decline to an average of 3.5% of GDP in 2025-26, provided spending discipline is maintained. General government debt (net of debt held by the Social Security Insurance Fund but including guaranteed debt) increased slightly to 89.3% of GDP in 2023, from 88.8% in 2022. Looking ahead, general government debt is expected to decline to 85.7% of GDP in 2026, in line with the expected improvement in the public finances.
CI notes that the government’s domestic creditor base remains resilient thanks to the satisfactory liquidity position of Jordanian banks and the Social Security Corporation (SSC). SSC holdings of government securities increased to 24.6% of GDP in 2023, from 22.6% a year earlier. While at present the SSC remains profitable, risks to long-term fiscal sustainability could limit its capacity to expand its portfolio.
Risks to the fiscal outlook remain high and include weaker economic growth, and therefore budget outcomes, due to an escalation in regional tensions, as well as the impact on interest expense of a more prolonged period of tight local and international monetary policies.
Economic strength remains moderate, with real GDP growing by 2.6% in 2023. The economy continues to benefit from external demand for its manufacturing products and tourism, as well as recovering FDI. Despite these developments, socioeconomic vulnerabilities remain significant. The unemployment rate for Jordanian nationals declined to a still high 21.4% in December 2023, compared to 22.9% in December 2022, while the poverty rate is estimated by the World Bank to have reached 26.7% of the country’s total population in 2022, compared to a pre-pandemic 15.7% in 2019. Jordan continues to host over 650,000 Syrian refugees, weighing on the country’s limited resources and further exacerbating socioeconomic vulnerabilities.
Jordan’s ratings remain supported by the relative soundness of the banking sector, which benefits from effective regulation, good capital and liquidity buffers, adequate asset quality, and recovering profitability. These positive factors help to offset underlying vulnerabilities, including significant funding and credit concentration risks, as well as high exposure to the sovereign.
The ratings continue to be constrained by very high geopolitical risk factors, with the war in Gaza and the ongoing tension on the northern border with Syria posing short- to medium-term threats. The ratings also remain constrained by high government debt and significant socioeconomic challenges (including high unemployment).
Rating Outlook
The Stable Outlook indicates that the ratings are likely to remain unchanged in the next 12 months. The outlook balances the increase in the country’s reserve buffer, the availability of international support, and ongoing fiscal consolidation measures against the moderately weak public finances and high central government debt levels.
Rating Dynamics: Downside Scenario
The Outlook could be revised to Negative in the next 12 months if regional or domestic instability risks increase markedly, if policy discipline weakens, or if the public and external finances deteriorate as a result of an unexpected external shock and/or significantly slower than expected economic growth.
Rating Dynamics: Upside Scenario
The Outlook could be revised to Positive or the ratings upgraded in the event of a more pronounced and durable decline in the budget deficit and government debt than currently envisaged, supported by the implementation of significant fiscal consolidation measures that further improve the budget structure and reduce rigidities.
Contact
Primary Analyst: Dina Ennab, Sovereign Analyst, ...
Committee Chairperson: Morris Helal, Senior Credit Analyst
About the Ratings
The credit ratings have been issued by Capital Intelligence Ratings Ltd, P.O. Box 53585, Limassol 3303, Cyprus.
The ratings, rating outlook and accompanying analysis are based on public information. This may include information obtained from one or more of the following sources: national statistical agencies, central banks, government departments or agencies, government policy documents and statements, issuer bond documentation, supranational institutions, and international financial institutions. CI considers the quality of information available on the rated entity to be satisfactory for the purposes of assigning and maintaining credit ratings, but does not audit or independently verify information published by national authorities and other official sector institutions.
The principal methodology used to determine the ratings is the Sovereign Rating Methodology dated September 2018 (see Information on rating scales and definitions, the time horizon of rating outlooks, and the definition of default can be found at Historical performance data, including default rates, are available from a central repository established by ESMA (CEREP) at
This rating action follows a periodic (semi-annual) review of the rated entity. Ratings on the entity were first released in December 1996. The ratings were last updated in November 2023. The ratings and rating outlook were disclosed to the rated entity prior to publication and were not amended following that disclosure.
The ratings have been initiated by CI. The following scheme is therefore applicable in accordance with EU regulatory guidelines.
Unsolicited Credit Rating
With Rated Entity or Related Third Party Participation: No
With Access to Internal Documents: No
With Access to Management: No
Conditions of Use and General Limitations
The information contained in this publication including opinions, views, data, material and ratings may not be copied, distributed, altered or otherwise reproduced, in whole or in part, in any form or manner by any person except with the prior written consent of Capital Intelligence Ratings Ltd (hereinafter “CI”). All information contained herein has been obtained from sources believed to be accurate and reliable. However, because of the possibility of human or mechanical error or other factors by third parties, CI or others, the information is provided “as is” and CI and any third-party providers make no representations, guarantees or warranties whether express or implied regarding the accuracy or completeness of this information.
Without prejudice to the generality of the foregoing, CI and any third-party providers accept no responsibility or liability for any losses, errors or omissions, however caused, or for the results obtained from the use of this information. CI and any third-party providers do not accept any responsibility or liability for any damages, costs, expenses, legal fees or losses or any indirect or consequential loss or damage including, without limitation, loss of business and loss of profits, as a direct or indirect consequence of or in connection with or resulting from any use of this information.
Credit ratings and credit-related analysis issued by CI are current opinions as of the date of publication and not statements of fact. CI’s credit ratings provide a relative ranking of credit risk. They do not indicate a specific probability of default over any given time period. The ratings do not address the risk of loss due to risks other than credit risk, including, but not limited to, market risk and liquidity risk. CI’s ratings are not a recommendation to purchase, sell, or hold any security and do not comment as to market price or suitability of any security for a particular investor.
The information contained in this publication does not constitute investment or financial advice. As the ratings and analysis are opinions of CI they should be relied upon to a limited degree and users of this information should conduct their own risk assessment and due diligence before making any investment or other business decisions.
Copyright © Capital Intelligence Ratings Ltd 2024
Capital Intelligence Ratings (CI Ratings or CI) today announced that it has upgraded Jordan’s Long-Term Foreign Currency Rating (LT FCR) and LT Local Currency Rating (LT LCR) to ‘BB-’, from ‘B+’. At the same time, CI Ratings has affirmed the sovereign’s Short-Term (ST) FCR and ST LCR at ‘B’. The Outlook on the ratings has been revised to Stable from Positive.
Rating Drivers
The upgrade of the ratings reflects the demonstrated resilience of the Jordanian Economy and its gradually improving capacity to withstand external adversities despite the challenging geopolitical landscape. These developments are underpinned by the government’s prudent macroeconomic policies, including ongoing fiscal consolidation efforts aimed at reining in the budget deficit and lowering public debt over the medium term. In addition, external liquidity has improved, supported by a reduction in the current account deficit and an increase in the foreign reserve buffer.
The ratings continue to be supported by the availability of financial assistance from multilateral lenders and external donors – particularly the IMF and US – as well as moderate external government debt, a resilient funding base, and a relatively sound banking sector.
International liquidity remains moderate, albeit improving, with the central bank’s stock of FX reserves increasing to USD18.6bn in March 2024, compared to USD17.3bn in December 2022. Coverage terms also improved, with the country’s reserve buffer covering around 91.9% of short-term debt on a remaining maturity basis in 2024, up from 89.3% in 2023. Non-resident deposits account for a large portion of short-term external debt. CI notes that these deposits have proven relatively stable over time and are mostly linked to Jordanian expatriates working abroad. Reserve coverage of short-term external debt rises to a more comfortable 2.6 times if these deposits are excluded.
Although the country’s chronic current account deficit continues to constrain the ratings, it declined to 3.5% of GDP in 2023, from 7.9% in 2022, reflecting an increase in services receipts and primary income and a drop in imports. Moving forward, CI expects the current account deficit to average 3.8% in 2024-26, reflecting a recovery in exports and robust services’ receipts. CI views the current and projected levels of external indebtedness as moderate-to-high, with gross external debt declining to 137.3% of current account receipts in 2023, compared to 144.2% in 2022.
External risk factors remain very high, reflecting the uncertainty surrounding the duration of the war in Gaza and the risk of regional escalation. Notwithstanding these developments, Jordan enjoys a record of weathering external shocks while maintaining economic and political stability. Despite the spillovers of the war in Gaza, portfolio investments and FDI increased by 1.4% in Q4 23, compared to the same quarter in 2022, while tourism receipts declined slightly to JOD1.31bn in Q4 23, compared to JOD1.33bn in Q4 22.
Reform progress has continued despite external adversities. The government has implemented several fiscal consolidation measures aimed at reining in the budget deficit and reducing debt levels. These have included gradual increases in water tariffs, the rationalisation of public sector and social spending, and the strengthening of tax administration and collection in a bid to broaden the tax base. While these reforms have helped to reduce the budget’s reliance on foreign grants, CI continues to consider the availability of financial assistance from external donors and multilaterals as a supporting factor for the ratings as it partially mitigates government liquidity risks stemming from moderate-to-high gross financing needs (18.2% of GDP in 2024).
Fiscal strength is moderately weak. The central government budget deficit – including grants – increased slightly to 5.1% of GDP in 2023, from 4.5% in 2022, due to slower revenue growth and higher interest expense. CI expects the central government budget deficit to decline to an average of 3.5% of GDP in 2025-26, provided spending discipline is maintained. General government debt (net of debt held by the Social Security Insurance Fund but including guaranteed debt) increased slightly to 89.3% of GDP in 2023, from 88.8% in 2022. Looking ahead, general government debt is expected to decline to 85.7% of GDP in 2026, in line with the expected improvement in the public finances.
CI notes that the government’s domestic creditor base remains resilient thanks to the satisfactory liquidity position of Jordanian banks and the Social Security Corporation (SSC). SSC holdings of government securities increased to 24.6% of GDP in 2023, from 22.6% a year earlier. While at present the SSC remains profitable, risks to long-term fiscal sustainability could limit its capacity to expand its portfolio.
Risks to the fiscal outlook remain high and include weaker economic growth, and therefore budget outcomes, due to an escalation in regional tensions, as well as the impact on interest expense of a more prolonged period of tight local and international monetary policies.
Economic strength remains moderate, with real GDP growing by 2.6% in 2023. The economy continues to benefit from external demand for its manufacturing products and tourism, as well as recovering FDI. Despite these developments, socioeconomic vulnerabilities remain significant. The unemployment rate for Jordanian nationals declined to a still high 21.4% in December 2023, compared to 22.9% in December 2022, while the poverty rate is estimated by the World Bank to have reached 26.7% of the country’s total population in 2022, compared to a pre-pandemic 15.7% in 2019. Jordan continues to host over 650,000 Syrian refugees, weighing on the country’s limited resources and further exacerbating socioeconomic vulnerabilities.
Jordan’s ratings remain supported by the relative soundness of the banking sector, which benefits from effective regulation, good capital and liquidity buffers, adequate asset quality, and recovering profitability. These positive factors help to offset underlying vulnerabilities, including significant funding and credit concentration risks, as well as high exposure to the sovereign.
The ratings continue to be constrained by very high geopolitical risk factors, with the war in Gaza and the ongoing tension on the northern border with Syria posing short- to medium-term threats. The ratings also remain constrained by high government debt and significant socioeconomic challenges (including high unemployment).
Rating Outlook
The Stable Outlook indicates that the ratings are likely to remain unchanged in the next 12 months. The outlook balances the increase in the country’s reserve buffer, the availability of international support, and ongoing fiscal consolidation measures against the moderately weak public finances and high central government debt levels.
Rating Dynamics: Downside Scenario
The Outlook could be revised to Negative in the next 12 months if regional or domestic instability risks increase markedly, if policy discipline weakens, or if the public and external finances deteriorate as a result of an unexpected external shock and/or significantly slower than expected economic growth.
Rating Dynamics: Upside Scenario
The Outlook could be revised to Positive or the ratings upgraded in the event of a more pronounced and durable decline in the budget deficit and government debt than currently envisaged, supported by the implementation of significant fiscal consolidation measures that further improve the budget structure and reduce rigidities.
Contact
Primary Analyst: Dina Ennab, Sovereign Analyst, ...
Committee Chairperson: Morris Helal, Senior Credit Analyst
About the Ratings
The credit ratings have been issued by Capital Intelligence Ratings Ltd, P.O. Box 53585, Limassol 3303, Cyprus.
The ratings, rating outlook and accompanying analysis are based on public information. This may include information obtained from one or more of the following sources: national statistical agencies, central banks, government departments or agencies, government policy documents and statements, issuer bond documentation, supranational institutions, and international financial institutions. CI considers the quality of information available on the rated entity to be satisfactory for the purposes of assigning and maintaining credit ratings, but does not audit or independently verify information published by national authorities and other official sector institutions.
The principal methodology used to determine the ratings is the Sovereign Rating Methodology dated September 2018 (see Information on rating scales and definitions, the time horizon of rating outlooks, and the definition of default can be found at Historical performance data, including default rates, are available from a central repository established by ESMA (CEREP) at
This rating action follows a periodic (semi-annual) review of the rated entity. Ratings on the entity were first released in December 1996. The ratings were last updated in November 2023. The ratings and rating outlook were disclosed to the rated entity prior to publication and were not amended following that disclosure.
The ratings have been initiated by CI. The following scheme is therefore applicable in accordance with EU regulatory guidelines.
Unsolicited Credit Rating
With Rated Entity or Related Third Party Participation: No
With Access to Internal Documents: No
With Access to Management: No
Conditions of Use and General Limitations
The information contained in this publication including opinions, views, data, material and ratings may not be copied, distributed, altered or otherwise reproduced, in whole or in part, in any form or manner by any person except with the prior written consent of Capital Intelligence Ratings Ltd (hereinafter “CI”). All information contained herein has been obtained from sources believed to be accurate and reliable. However, because of the possibility of human or mechanical error or other factors by third parties, CI or others, the information is provided “as is” and CI and any third-party providers make no representations, guarantees or warranties whether express or implied regarding the accuracy or completeness of this information.
Without prejudice to the generality of the foregoing, CI and any third-party providers accept no responsibility or liability for any losses, errors or omissions, however caused, or for the results obtained from the use of this information. CI and any third-party providers do not accept any responsibility or liability for any damages, costs, expenses, legal fees or losses or any indirect or consequential loss or damage including, without limitation, loss of business and loss of profits, as a direct or indirect consequence of or in connection with or resulting from any use of this information.
Credit ratings and credit-related analysis issued by CI are current opinions as of the date of publication and not statements of fact. CI’s credit ratings provide a relative ranking of credit risk. They do not indicate a specific probability of default over any given time period. The ratings do not address the risk of loss due to risks other than credit risk, including, but not limited to, market risk and liquidity risk. CI’s ratings are not a recommendation to purchase, sell, or hold any security and do not comment as to market price or suitability of any security for a particular investor.
The information contained in this publication does not constitute investment or financial advice. As the ratings and analysis are opinions of CI they should be relied upon to a limited degree and users of this information should conduct their own risk assessment and due diligence before making any investment or other business decisions.
Copyright © Capital Intelligence Ratings Ltd 2024
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