Jordan – Ratings Affirmed with a Stable Outlook

(MENAFN- Capital Intelligence Ltd) Rating Action

Capital Intelligence Ratings (CI Ratings or CI) today announced that it has affirmed Jordan’s Long-Term Foreign Currency Rating (LT FCR) and LT Local Currency Rating (LT LCR) at ‘BB-’. 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 remains Stable.

Rating Drivers

The ratings reflect the increase in the sovereign’s capacity to withstand external shocks as demonstrated by the resilience of the Jordanian economy and improving foreign reserve buffer, despite the challenging geopolitical landscape. These developments are underpinned by the government’s prudent macroeconomic policies, including ongoing fiscal consolidation efforts aimed at lowering general government debt over the medium term.

The ratings continue to be supported by low-to-moderate external debt, and a relatively sound banking sector. The ratings also take into consideration the availability of external financing in the form of bilateral and multilateral loans from the World Bank and the IMF, as well as donor support.

The ratings are constrained by high geopolitical risk factors, including the war in Gaza and the tension between Israel and Iran, as well as increasing external adversities including the freezing of USAID activities and US trade policy. The ratings are also constrained by a chronic current account deficit, very high general government debt, high central government interest expense, and significant socioeconomic challenges (including high unemployment).

International liquidity remains moderate – albeit improving – with the central bank’s stock of FX reserves increasing to USD22.8bn in April 2025 (from USD21.0bn in 2024 and USD18.1bn in 2023). Reserve adequacy has improved, with official reserves expected to cover around 112.9% of short-term external debt on a remaining maturity basis in 2025, up from 99.6% in 2024. Non-resident deposits in the banking system still 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 3.4 times if these deposits are excluded. Moreover, CI views the upcoming external general government debt maturities of JOD2.4bn (6.0% of GDP) in 2025 and JOD2.6bn (6.2% of GDP) in 2026 to be within the government’s repayment capacity.

The country’s chronic current account deficit continues to constrain the ratings. It is expected to widen to 6.3% of GDP in 2025, from 5.8% in 2024, due to higher imports and a decline in services receipts, as well as the potential impact of US trade policy on Jordan’s exports. Moving forward, CI expects the current account deficit to widen further to 7.0% of GDP in 2026, reflecting ongoing external adversities. We view the current and projected levels of external indebtedness as being low-to-moderate, with gross external debt projected to slightly increase to 140.5% of current account receipts (CARs) in 2025, from 137.6% in 2024.

External risk factors remain very high, reflecting mounting regional uncertainty surrounding the war in Gaza, and the tension between Israel and Iran. A notable recent development is the freezing of USAID funding, which has historically played a critical role in supporting Jordan’s development programmes. The uncertainty surrounding US trade policy – particularly the future of preferential trade arrangements under the Jordan–US Free Trade Agreement – could further limit export growth. These external pressures are partially mitigated by the lifting of sanctions on Syria and our assumption that trade routes via Syria will resume in the short to medium term. Moreover, CI notes that the recently signed agreement between the EU and Jordan would assist in mitigating the risks stemming from frozen USAID projects. Notwithstanding these developments, Jordan has a record of weathering external shocks while maintaining economic and political stability.

Fiscal strength is moderately weak. The central government budget (including grants) posted a deficit of 5.4% of GDP in 2024 (5.3% in 2023), reflecting sluggish revenues. CI expects the central government budget deficit to reach an average of 5.0% of GDP in 2025-26 given mounting spending pressures. Notwithstanding the above, the central government primary budget is expected to record a small surplus of 0.3% of GDP in 2025, compared to a surplus of 0.1% in 2024, while central government interest expense is estimated to decline to 21.6% of revenues in 2025, from 22.2% in 2024.

The general government budget recorded a deficit of 2.8% of GDP in 2024 (1.9% in 2023), thanks to the surplus generated by the Social Security Corporation (SSC). General government interest expense – net of interest paid to the Social Security Insurance Fund (SSIF), the investment arm of SSC – increased to 13.1% of total general government revenues in 2024, from 10.6% in 2023.

General government debt (net of debt held by the SSIF, but including guaranteed debt) increased slightly to 90.2% of GDP in 2024, from 89.3% in 2023. Moving forward, general government debt is expected to increase to 92.6% of GDP in 2025, before declining slightly to 91.9% in 2026.

CI notes that the central government’s domestic creditor base still benefits from the satisfactory liquidity of Jordanian banks and the SSC. SSC holdings of government securities through the SSIF stood at JOD10bn (26.4% of GDP) in December 2024, compared to JOD8.9bn (24.5% of GDP) in December 2023. SSC holdings increased further to JOD10.3bn (26.9% of projected GDP) in March 2025.

Economic strength remains moderate. Jordan’s economy is currently operating below its productive capacity, with key macroeconomic indicators pointing to continued underperformance. Real GDP growth reached 2.5% in 2024 (3.1% in 2023), a rate broadly consistent with recent trends but insufficient to narrow the gap between actual and potential output. Labor market conditions remain challenging, with the unemployment rate persistently high at 21.4% and youth unemployment approaching 46% – levels that reflect significant underutilisation of human capital. Inflationary pressures remain contained, with annual inflation averaging 1.6%, indicative of subdued domestic demand. The recent increase in the minimum wage offers limited support to household consumption, while overall wage growth remains restrained.

Jordan’s ratings continue to be supported by the relative soundness of the banking sector, which benefits from effective regulation, good capital and liquidity buffers, adequate asset quality and continued profitability. These positive factors help to offset underlying vulnerabilities, including significant funding and credit concentration risks, as well as high exposure to the sovereign.

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 and the availability of international support (especially from the EU and IMF) against the moderately weak public finances and high general government debt.

Rating Dynamics: Downside Scenario

The Outlook could be revised to Negative or the ratings lowered in the next 12 months if regional or domestic instability risks increase markedly, 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.

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Unsolicited Credit Rating

With Rated Entity or Related Third Party Participation: No
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With Access to Management: No


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