Jordan's public debt hits record $45 billion amid COVID-19 spending

AMMAN (Reuters) - Jordan’s public debt has shot up 6.6 % in the first six months of the year to a record $45 billion with extra financing needs to soften the blow of coronavirus on an aid dependent economy hard hit by the pandemic, finance ministry data showed.

The debt that has now for the second month jumped above the 100 % ceiling to 101.8 % of GDP stood at 32 billion ($45 bln) at end of June with domestic debt comprising 19 billion dinars and 12.98 billion in foreign debt, figures showed.

Debt has spiraled due to years of runaway spending on a rapidly expanding public sector as successive governments sought to appease citizens with state jobs to maintain stability.

The country has government spending that is among the highest in the world relative to the size of its economy.

Jordan’s Finance Minister Mohamad Al Ississ behind an unprecedented campaign against rampant tax evasion this year as part of IMF-backed fiscal reforms to shore up stretched finances, hopes the public debt rise will slow down next year as the economy begins to rebound.

Standard and Poor’s earlier this month maintained the country’s B+/B’ ratings with GDP expected to contract by 5.5% in 2020 saying Jordan’s funding sources were resilient and donor support expected to remain strong.

The country’s $1.3 billion four-year IMF programme that signaled confidence in the country’s reform agenda has also helped unlock more cheaper financing from concessionary loans and more grants by its major Western donors to mitigate the impact of COVID-19, officials say.

The kingdom has already secured $1.7 billion till July with no sign the pandemic has affected levels of donor support for the staunch U.S. ally, say government decisionmakers who expect it to reach $3 billion in 2020.

Al Ississ said Jordan’s $1.75 billion double Eurobond tranche last June, oversubscribed over six times at relatively low interest rates, has also helped eased pressure on the government to borrow additional local currency debt.

The government did not want to crowd out credit to the private sector that was needed to spur growth to help the economy’s gradual recovery from next year, Al Ississ added.

Reporting by Suleiman Al-Khalidi