The economist and head of the Arab Forum, Mohammad Al-Bashir, said that addressing Jordan's economic crisis requires a fundamental review of public-finance tools. He warned against continued reliance on sales tax and borrowing to cover the budget deficit, arguing that rising energy and fuel costs, taxes and bank interest rates have reduced citizens' purchasing power and weakened the economy's capacity to grow.

Speaking on a programme on Radio Al-Balad, Al-Bashir said the relationship between politics and economics is closely intertwined, and that the ability of political leaders to manage public finances largely determines the country's economic condition. He said public finances rest on three main pillars: current expenditure, taxation and public debt.

The way these three tools are managed, he argued, determines whether the economy is moving in a healthy direction or accumulating structural imbalances. In Jordan's case, he said, the problem lies not in the existence of these tools themselves, but in the way they are being managed.

Current Expenditure and Debt-Service Costs

Al-Bashir said Jordan's current expenditure is high, with salaries, cash assistance and debt-service costs accounting for the largest share. This leaves limited room for spending on essential sectors such as health, education, security and public services.

He noted that the public debt interest bill has risen significantly in recent years. It was previously around JD1.6 billion annually, he said, but has now reached approximately JD2 billion, and possibly JD2.25 billion, per year.

Rising debt-service costs directly squeeze current expenditure and limit the government's ability to direct resources towards services and investment.

The problem, he stressed, is not simply the size of the debt, but how borrowing is used. Debt can be an economic tool when directed towards productive projects capable of generating returns, creating jobs and increasing revenues. It becomes a burden, however, when it is primarily used to cover the budget deficit.

Jordan, he said, has relied heavily for more than two decades on borrowing for the latter purpose, financing deficits rather than directing loans towards major productive projects.

He cited railways, water projects, airports in the governorates, energy projects and infrastructure as examples of areas where borrowing could be directed.

Some of Jordan's debt has indeed been used to finance infrastructure and development projects, he acknowledged, but he argued that a significant share of borrowing has gone towards covering deficits. Tax reform, he said, could have formed part of the solution to the fiscal imbalance instead of allowing debt to continue to revolve.

Sales Tax at the Centre of the Crisis

Al-Bashir placed the tax system among the leading causes of Jordan's economic imbalances, criticising the heavy reliance on sales tax as a major source of government revenue.

He said sales tax accounts for more than 70% of tax revenues, while the contribution of income tax has declined compared with previous years.

Sales tax was introduced in Jordan in the mid-1990s and gradually became a central instrument for financing the Treasury, at the expense of direct taxation, he said.

In Al-Bashir's view, this shift created an imbalance in the distribution of the tax burden because sales tax is imposed on consumption, meaning citizens pay it regardless of their income level.

Income tax serves a different function, he explained, because it can help narrow the gap between different income groups through a more progressive system.

He argued that reducing income-tax rates for companies, banks and financial institutions over the past decades, while expanding reliance on sales tax, shifted a greater share of the burden onto consumers.

Income-tax rates on some sectors were previously much higher before being gradually reduced, he noted, while sales-tax rates rose from relatively low levels to higher rates, reaching 16% on some goods and services.

Citizens Pay the Tax Before They Receive Their Income

Al-Bashir discussed the impact of the tax system on Jordanian households, saying sales tax has become part of the everyday cost borne by citizens on almost every purchase.

Household spending, he explained, includes a wide range of goods and services subject to different sales-tax rates, starting at lower rates and reaching 16%.

The problem does not stop with the final consumer, he said. It also affects domestic producers.

Companies and factories may sell part of their products on credit, while still being required to pay sales tax before collecting payment from customers.

He gave the example of a company making JD1 million in sales. If part of those sales is deferred, the company may have to pay tax on money it has not yet received, while some debts may ultimately become difficult or impossible to collect.

That cost eventually finds its way into the price of the product and onto the consumer, weakening the competitiveness of Jordanian products against imports.

Al-Bashir also argued that a heavier tax burden on consumption affects production. When purchasing power falls, demand falls as well, meaning production lines across different sectors cannot operate at full capacity.

Declining Purchasing Power

Al-Bashir said Jordanians increasingly feel that a large portion of their purchasing power has disappeared, despite the continued stability of the Jordanian dinar.

The problem is not necessarily the exchange rate, he explained, but the rising cost of goods and services and the expanding range of expenses households are expected to cover.

The same amount of money that once allowed a citizen to purchase a larger basket of necessities now buys significantly less, he said.

He also pointed to changes in consumption patterns in Jordan. Services that were once considered non-essential have become part of monthly household expenses, such as internet access, while the costs of water, education, healthcare and transportation have also risen.

The cost of living is placing increasing pressure on the middle class, he said, while higher prices and declining purchasing power have contributed to its contraction.

Al-Bashir has previously warned about the impact of rising energy, fuel, transportation, fees and taxes on Amman's position among capitals with high living costs.

Fuel and Energy Raise the Cost of the Economy

Speaking about fuel prices, Al-Bashir said higher energy costs affect far more than the petrol and diesel bills paid by consumers. They feed into almost every sector of the economy.

Energy costs are embedded in production, transportation and services, meaning that higher energy prices ultimately raise the cost of finished goods.

Taxes imposed on fuel represent a significant component of the price paid by consumers, he said, arguing that any discussion of fuel prices must examine the tax component alongside global energy prices.

Higher energy costs, combined with sales tax and bank interest rates, form a set of pressures that increase the cost of Jordanian production and weaken its competitiveness.

Al-Bashir has previously called for reductions in sales tax, the special tax on fuel and bank interest rates, describing them as some of the most significant pressures on the economy.

Three Issues Governments Have Neglected

Al-Bashir described housing, education, healthcare and transportation as among the most significant areas placing growing pressure on Jordanian households.

He said around one-third of Jordanian students in pre-university education attend private schools, arguing that choosing private education does not necessarily mean that a family is financially comfortable. It can instead reflect pressures and shortcomings affecting some public schools.

Healthcare costs have also become a major burden, he said, alongside transportation costs.

He referred to a study by researcher Hamada Abu Najmeh on the reasons workers leave their jobs. According to the study, 36% of those who left their jobs did so because of transportation costs, particularly women.

High transportation costs can prevent workers from remaining in employment even when they have jobs, he argued, because their net income after commuting expenses becomes too low.

"Bourgeoisie" in Education, Healthcare and Transportation

Describing the social reality, Al-Bashir said money has become a decisive factor in determining whether citizens can access better education, healthcare and transportation.

Those with greater financial means can secure better education, better healthcare and more comfortable transportation, while lower-income groups are left with fewer and lower-quality options.

He said this raises a broader issue of social justice, as income disparities increasingly translate directly into unequal access to essential services.

Tax reform, he added, must also be linked to a reassessment of the burdens placed on households.

Public Debt: Loans to Repay Loans

Asked why public debt continues to rise, Al-Bashir said the central problem is the use of borrowing to cover the budget deficit.

Loans, he argued, are not primarily directed towards productive projects capable of generating new income. Instead, a significant portion is used to cover deficits and service existing debt.

This creates a cycle in which the government borrows to cover the deficit, debt-service costs rise, and the government then needs additional borrowing to meet its financial obligations.

He described this model as one of the main reasons behind the persistence of Jordan's fiscal crisis.

According to his estimate, Jordan's public debt has reached around JD40 billion. He stressed that this figure cannot be considered in isolation from the size of the economy and its capacity to generate growth and revenues.

Al-Bashir has previously said Jordan's debt has risen substantially over the past decade as a result of budget deficits and high current expenditure.

Household and Corporate Debt

Al-Bashir did not limit the debt problem to the government. He also discussed rising household and corporate borrowing.

He estimated that individuals owe around JD15 billion to banks, while corporate debt exceeds JD20 billion.

Higher interest rates increase the burden on borrowers, he said, forcing them to devote a larger share of their income to loan repayments and interest.

The spread of lending associations and informal borrowing among citizens is another indicator of the pressures facing households, he added.

Some citizens, he said, borrow from one bank to meet obligations to another, effectively recycling debt rather than addressing the underlying financial problem.

The Economy Is Not Creating Enough Jobs

Al-Bashir linked weak economic growth to the labour market, saying current growth rates are insufficient to absorb population growth and the number of new entrants into the workforce.

Around two decades ago, Jordan had a population of roughly four million, he said, while the population now exceeds seven million. This means the economy needs significantly higher growth rates to absorb new entrants into the labour market.

The economy cannot absorb the number of graduates in fields such as medicine, engineering, pharmacy and law, he said.

A weak private sector has made government employment more attractive, despite the public sector's limited capacity to absorb new workers.

He pointed to cases of engineers working for extremely low wages, with some earning amounts that do not reflect their qualifications, while others receive wages below the minimum wage, according to his account.

Early Retirement Adds Pressure to the Labour Market

Al-Bashir also discussed the impact of early retirement on the labour market. He said employees who leave their jobs at a relatively young age and then return to the market through new employment create additional competition for young people entering the workforce.

A retiree receiving a pension may be willing to accept a lower salary than someone who depends entirely on employment as their sole source of income.

This, he argued, distorts the labour market, particularly when retirees return to work while recent graduates struggle to find opportunities.

Early retirement also places pressure on the Social Security Corporation because it requires the institution to meet pension obligations over longer periods.

Public Employment and the Salary Gap

Al-Bashir criticised what he described as the growing disparity in salaries within the public sector.

He said there are significant differences in income levels across government institutions, with part of the problem linked to bonuses, allowances, consultancy fees and other payments added to basic salaries.

Looking only at the salary line in the national budget does not reveal the full wage bill, he argued, because there are also allowances, bonuses, meeting payments, consultancy fees and other expenses.

The government can reduce part of this expenditure without dismissing employees, he said, by reviewing bonuses, allowances, assignments and consultancy arrangements.

He criticised situations in which a minister or director-general may have a media adviser alongside an existing media office, or a legal adviser alongside an established legal department, arguing that such arrangements can inflate expenditure beyond actual institutional needs.

Why Are Reform Programmes Not Working?

Asked about Jordan's Economic Modernisation Vision, launched in 2022, Al-Bashir said its performance should be assessed by asking whether it has addressed the roots of the country's fiscal crisis.

Any reform programme that does not address current expenditure, taxation and public debt will have limited impact on structural economic imbalances, he argued.

Continued reliance on sales tax, rising debt-service costs and persistently high current expenditure indicate that the core fiscal problem has not fundamentally changed, he said.

In his view, economic reform requires structural changes rather than simply launching new projects or introducing new performance indicators.

Industry and Agriculture at the Heart of the Solution

Al-Bashir called for economic policy to place greater emphasis on industry and agriculture, describing both sectors as capable of creating jobs, increasing production and reducing the trade deficit.

He cited countries such as Uzbekistan as examples, saying they achieved high growth rates after making structural economic changes and supporting productive sectors.

Strengthening industrial and agricultural production and export capacity could increase growth, reduce the trade deficit and lower unemployment, he argued.

Jordan's economy, he said, needs to move from focusing primarily on managing deficits towards building a new productive base.

Credit Rating and Lower Borrowing Costs

Al-Bashir said improving Jordan's credit rating could help reduce borrowing costs, but stressed that achieving this requires strengthening the economy's capacity for growth and production.

A higher credit rating can lead to better financing terms, lower interest rates and longer repayment periods, he said. But this does not solve the underlying problem if the economy remains dependent on borrowing.

He pointed to countries that have sought to reduce their reliance on international financial institutions, arguing that continued dependence on debt can eventually affect a country's economic and political decision-making.

The International Monetary Fund

Al-Bashir criticised the role played by international financial institutions in shaping economic policies in indebted countries. He argued that programmes implemented by the International Monetary Fund and World Bank cannot be separated from the economic and political choices made by governments.

Jordan has dealt with these institutions for many years, he said, but he believes the results have not been sufficient to address the country's structural economic imbalances.

Al-Bashir has expressed similar views previously, arguing that IMF programmes have not produced a fundamental improvement in the Jordanian economy and linking the persistence of debt to fiscal reform programmes and continued reliance on borrowing.

Tax Reform First

At the end of his remarks, Al-Bashir identified three areas he said should form the starting point for any fundamental response to Jordan's economic crisis.

The first is a review of the sales-tax system. The second is a reassessment of current expenditure, particularly bonuses, allowances and non-essential spending. The third is a different approach to public debt, so that borrowing is not primarily used to cover deficits.

He stressed that tax reform should restore a balance between income tax and sales tax while reducing the burden placed on consumption.

The economy cannot regain its capacity for growth while Jordanian households remain under pressure from the rising costs of education, healthcare, transportation, energy and basic goods, he said.

Ultimately, he argued, the problem is not a single figure in the national budget. It concerns an entire economic model that determines who pays taxes, who receives exemptions, how government money is spent and where borrowed funds are directed.

Al-Bashir concluded that addressing Jordan's economic problems requires a change in the way public finances are managed, so that borrowing becomes a tool for financing investment and production rather than a mechanism for covering deficits, while the tax system moves away from excessive reliance on consumption towards a fairer distribution of the tax burden.