Fiscal consolidation, public debt, and growth in Jordan: Evidence from public and municipal finance indicators
-
DOIhttp://dx.doi.org/10.21511/pmf.15(3).2026.10
-
Article InfoVolume 15 2026, Issue #3, pp. 144–157
- 7 Views
-
0 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Type of the article: Research Article
Abstract
The purpose of this study is to examine whether fiscal balance, revenue mobilization, and real economic growth are associated with annual changes in Jordan’s public debt-to-GDP ratio during 2014–2024 and to interpret the implications for public and municipal finance. The study uses annual macro-fiscal data compiled from the IMF Regional Economic Outlook series hosted by FRED, World Bank indicators, the Central Bank of Jordan, and Ministry of Finance reports. It applies descriptive analysis, correlation analysis, and parsimonious ordinary least squares specifications, with all coefficients, p-values, diagnostic tests, and robustness checks interpreted cautiously because the usable regression sample after first differencing is very small. The results show that the public-debt ratio increased from 78.0% of GDP in 2019 to 88.0% in 2020 and remained above 90% during 2021–2024. Revenue excluding grants recovered from 20.1% of GDP in 2020 to 24.1% in 2024, but this recovery did not restore the debt ratio to its pre-pandemic path. In a short annual sample, the baseline regression suggests that fiscal balance is negatively associated with annual debt changes, while real GDP growth has the expected negative sign but weaker statistical significance. These results are indicative rather than causal and should be read together with debt-dynamics theory and Jordan’s fiscal policy context. The findings are consistent with a cautious, growth-friendly consolidation approach, interpreted as an indicative policy implication rather than a direct causal estimate, that strengthens revenue administration, protects productive capital expenditure, manages utility-related guarantees, and improves municipal finance transparency.
- Keywords
-
JEL Classification (Paper profile tab)H63, H62, H72, C22
-
References43
-
Tables13
-
Figures3
-
- Figure 1. Conceptual framework
- Figure 2. Jordanian public finance indicators, 2014–2024
- Figure 3. Real GDP growth and annual changes in the public-debt ratio
-
- Table 1. Variables and expected effects in the debt-dynamics model
- Table 2. Jordanian macro-fiscal indicators, 2014–2024
- Table 3. Descriptive statistics for the annual fiscal dataset
- Table 4. Distribution diagnostics for the annual variables
- Table 5. Correlation matrix for fiscal indicators and annual debt changes
- Table 6. Baseline OLS results for annual changes in the public-debt ratio
- Table 7. Baseline model fit and diagnostic tests
- Table 8. Robustness and sensitivity checks for the debt-change regressions
- Table 9. Indicative association summary
- Table 10. Relationship between this study and previous evidence
- Table A1. Dataset used in the baseline regression model
- Table B1. Interpretation cautions for the main variables
- Table C1. Illustrative policy priorities derived from the combined evidence base
-
- Afonso, A., & Jalles, J. T. (2013). Growth and productivity: The role of government debt. International Review of Economics & Finance, 25, 384-407.
- Al Hayek, M. A. (2024). The role of public debt as a moderator in the relationship between revenues and capital expenditures of the Jordanian government. Public and Municipal Finance, 13(2), 14-23.
- Alesina, A., & Ardagna, S. (2010). Large changes in fiscal policy: Taxes versus spending. Tax Policy and the Economy, 24(1), 35-68.
- Alesina, A., Favero, C., & Giavazzi, F. (2019). Austerity: When it works and when it doesn’t. Princeton University Press.
- Alkasasbeha, O. M. A., Haron, N. F., & Abueid, A. I. S. (2018). The impact of government expenditures and taxes on economic growth in Jordan. American Based Research Journal, 7(12), 32-38.
- Al-Masaeed, A. A., & Tsaregorodtsev, E. (2018). The impact of fiscal policy on the economic growth of Jordan. International Journal of Economics and Finance, 10(10), 145-155.
- Bahl, R., & Bird, R. (2018). Fiscal decentralization and local finance in developing countries. Edward Elgar.
- Barro, R. J. (1990). Government spending in a simple model of endogenous growth. Journal of Political Economy, 98(5), S103-S125.
- Blanchard, O. (2019). Public debt and low interest rates. American Economic Review, 109(4), 1197-1229.
- Bohn, H. (1998). The behavior of U.S. public debt and deficits. The Quarterly Journal of Economics, 113(3), 949-963.
- Central Bank of Jordan. (2024). Annual report 2024. Central Bank of Jordan.
- Clements, B., Coady, D., & Gupta, S. (2012). The economics of public health care reform in advanced and emerging economies. International Monetary Fund.
- Devarajan, S., Swaroop, V., & Zou, H. (1996). The composition of public expenditure and economic growth. Journal of Monetary Economics, 37(2), 313-344.
- Easterly, W., & Rebelo, S. (1993). Fiscal policy and economic growth: An empirical investigation. Journal of Monetary Economics, 32(3), 417-458.
- Escolano, J. (2010). A practical guide to public debt dynamics, fiscal sustainability, and cyclical adjustment of budgetary aggregates. IMF Technical Notes and Manuals. International Monetary Fund.
- Federal Reserve Bank of St. Louis (FRED). (2026a). Middle East and Central Asia Regional Economic Outlook. Total Government Debt for General Government for Jordan (JORGGDGDPGDPPT).
- Federal Reserve Bank of St. Louis (FRED). (2026b). Middle East and Central Asia Regional Economic Outlook. Central Government Net Lending/borrowing (central Govt Fiscal Balance) for Jordan (JORGCXCNLGDPGDPPT).
- Federal Reserve Bank of St. Louis (FRED). (2026c). Middle East and Central Asia Regional Economic Outlook. Total Revenue, Excluding Grants, for General Government for Jordan (JORGGRXGGDPGDPPT).
- Ghosh, A. R., Kim, J. I., Mendoza, E. G., Ostry, J. D., & Qureshi, M. S. (2013). Fiscal fatigue, fiscal space and debt sustainability in advanced economies. The Economic Journal, 123(566), F4-F30.
- Guajardo, J., Leigh, D., & Pescatori, A. (2014). Expansionary austerity? International evidence. Journal of the European Economic Association, 12(4), 949-968.
- Gupta, S., Clements, B., Baldacci, E., & Mulas-Granados, C. (2005). Fiscal policy, expenditure composition, and growth in low-income countries. Journal of International Money and Finance, 24(3), 441-463.
- Hemming, R., Kell, M., & Mahfouz, S. (2002). The effectiveness of fiscal policy in stimulating economic activity: A review of the literature (IMF Working Paper No. 02/208). International Monetary Fund.
- Ilzetzki, E., Mendoza, E. G., & Vegh, C. A. (2013). How big (small?) are fiscal multipliers? Journal of Monetary Economics, 60(2), 239-254.
- International Monetary Fund (IMF). (2024a). Jordan: Request for an Extended Arrangement Under the Extended Fund Facility and Cancellation of the Current Arrangement Under the Extended Fund Facility-Press Release; Staff Report; and Statement by the Executive Director for Jordan (IMF Country Report No. 2024/010).
- International Monetary Fund (IMF). (2024b). Jordan: First Review Under the Extended Arrangement Under the Extended Fund Facility and Request for Modification of Performance Criteria-Press Release; and Staff Report (IMF Country Report No. 2024/197).
- International Monetary Fund (IMF). (2024c). Jordan: 2024 Article IV Consultation, Second Review Under the Extended Arrangement Under the Extended Fund Facility, and Request for Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Jordan (IMF Country Report No. 2024/345).
- Kneller, R., Bleaney, M. F., & Gemmell, N. (1999). Fiscal policy and growth: Evidence from OECD countries. Journal of Public Economics, 74(2), 171-190.
- Ministry of Finance. (2017). Fiscal decentralization in Jordan: Strengthening the role of governorates in improving public services. Ministry of Finance.
- Ministry of Finance. (2022). Public financial management strategy 2022–2025. Ministry of Finance.
- Ministry of Finance. (2024a). Macro fiscal outlook report. Macro-Fiscal Unit, Ministry of Finance.
- Ministry of Finance. (2024b). Jordan debt quarterly report, Q4 2024. Ministry of Finance.
- Musgrave, R. A. (1959). The theory of public finance: A study in public economy. McGraw-Hill.
- Oates, W. E. (1972). Fiscal federalism. Harcourt Brace Jovanovich.
- Panizza, U., & Presbitero, A. F. (2014). Public debt and economic growth: Is there a causal effect? Journal of Macroeconomics, 41, 21-41.
- Rodriguez, L., & Wai-Poi, M. (2024). Fiscal policy, poverty and inequality in Jordan: The role of taxes and public spending (Policy Research Working Paper No. 10732). World Bank.
- Shah, A. (2006). Local governance in developing countries. World Bank.
- Ter-Minassian, T. (Ed.). (1997). Fiscal federalism in theory and practice. International Monetary Fund.
- Tiebout, C. M. (1956). A pure theory of local expenditures. Journal of Political Economy, 64(5), 416-424.
- Tzannatos, Z., & Saif, I. (2023). Assessing the sustainability of Jordan’s public debt: The Importance of Reviving the Private Sector and Improving Social Outcomes (Policy Working Paper No. 11).
- Woo, J., & Kumar, M. S. (2015). Public debt and growth. Economica, 82(328), 705-739.
- World Bank. (2021). Fiscal policy, poverty and inequality in Jordan: Policy summary. World Bank.
- World Bank. (2024). Jordan Economic Monitor, Summer 2024: Strength amidst strain. World Bank.
- World Bank. (2026). GDP growth (annual %) – Jordan (NY.GDP.MKTP.KD.ZG), World Development Indicators [Dataset]. World Bank.


