Raad Mahmoud Al-Tal

Financial results for the first eight months of 2025 show that fiscal policy remained disciplined in controlling current expenditures, while capital spending rose significantly. This indicates a clear shift in public spending priorities toward stimulating economic activity and supporting productive sectors. Total government spending reached 7,795 million dinars, compared to 7,291 million dinars during the same period in 2024 an increase of 504 million dinars, or about 6.9 per cent.

Despite the overall rise, current expenditures remained almost unchanged, increasing slightly from 7,028.1 to 7,069 million dinars an increase of only 0.6 per cent. This stability reflects the government’s continued control over operational costs, wages, and subsidies. In contrast, capital expenditures grew sharply from 262.9 to 725.6 million dinars, an increase of 462.7 million dinars, averaging 57.8 million dinars per month. This marks a return to investment in infrastructure and development projects after a cautious fiscal year in 2024.

This policy shift follows a challenging year in 2024, when the Gaza war disrupted investment spending and weakened key sectors such as trade and tourism. Although regional instability persisted into 2025, the recent peace agreement has helped ease uncertainty, allowing the government to redirect spending toward growth-oriented projects and the implementation of the Economic Modernization Vision.

On the revenue side, public finances showed notable improvement. Local revenues increased from 5,972.5 million dinars in 2024 to 6,194 million dinars in 2025 an increase of 257.4 million dinars, or about 32.2 million dinars per month. Tax revenues also rose markedly, from 14 million dinars in 2024 to 165.9 million dinars in 2025, with an average monthly gain of 20.7 million dinars. This improvement reflects better tax collection and a gradual recovery in economic activity after the slowdown of the previous year.

A closer look reveals that the sales tax was the main driver of revenue growth. The general tax on goods and services rose by 217 million dinars, or 7.9 per cent, highlighting the growing reliance on indirect taxes linked to consumption. Meanwhile, income and profit taxes fell by 3.5 per cent (a decline of 51.1 million dinars), reflecting slower business activity, weaker demand, and the lingering economic effects of the Gaza conflict. This shift in the tax structure provides short-term fiscal stability but exposes the vulnerability of revenues to slowdowns in real economic growth and productivity.

The drop in income tax collections does not necessarily signal weak tax policy but rather mirrors the broader slowdown in corporate profits and the economy’s shift toward indirect taxes, which rise with consumption. Direct taxes, by contrast, remain more sensitive to actual profits and employment levels.

Despite the improvement in revenues, the budget deficit widened from 1,318.5 million dinars in 2024 to 1,601 million dinars in 2025 an increase of 282.5 million dinars. The monthly average deficit rose to about 200 million dinars, up from 165 million the previous year. This increase was driven primarily by higher capital spending rather than revenue weakness, confirming that fiscal policy in 2025 aimed to use public spending as a tool to stimulate growth rather than just cover operating costs.

An encouraging development was the improvement in the self-reliance ratio (local revenues to current expenditures), which increased from 84.9 per cent in 2024 to 87.6 per cent in 2025 a gain of 2.7 percentage points. This means that the government financed a larger share of its current expenditures from domestic revenues, reducing dependence on external aid or borrowing. The improvement reflects stronger revenue collection and greater fiscal sustainability.

In summary, the government successfully maintained control over current spending while expanding investment in productive and infrastructure sectors. This balance between fiscal discipline and economic stimulus marks progress toward sustainable public finances and aligns with the goals of the Economic Modernization Vision. However, the structure of Jordan’s revenues remains heavily dependent on consumption-based taxes rather than income and production. While this offers short-term stability, it underscores the need to diversify the tax base and strengthen direct taxation to ensure fiscal resilience amid economic and regional volatility.