Meed | Jordan policymakers walk tightrope

Jordan policymakers walk tightrope

4 June 2024

Few countries will envy Jordan right now, as one of the Israel-Palestine-adjacent countries most severely impacted both economically and politically by the inevitable spillover of the war in Gaza.

Economic growth in Jordan has inevitably been hit by the conflict, especially in the country’s trade and tourism sectors. Domestic opposition to the war has meanwhile left Ammann walking a tightrope – opposing Israel while remaining part of a broad regional Western-backed coalition that saw Jordan play its part in stemming missile attacks launched by Iran at Israel in April.

The Gaza war is only one of a number of pitfalls confronting the government, which currently faces an unemployment rate of about 22%, desperate water scarcity, and the presence of 1.3 million Syrian refugees topping up the country’s existing population of refugees from Iraq, Palestine and elsewhere.

In these invidious circumstances, the country has performed well, but has also suffered negative consequences.

“Jordan has preserved economic and political stability despite significant external shocks, including social instability in the region (Arab Spring) and wars in neighbouring countries (Iraq and Syria), but these shocks have led to lower growth and significant government debt build-up,” says Erich Arispe, a senior director in Fitch Ratings’ sovereigns group.

For now, Jordan appears to be carrying off the delicate diplomatic work in relation to Israel. It is playing a critical role in the aid effort to Gaza, distancing itself from its neighbour by withdrawing its ambassador from Tel Aviv, and mothballing a planned water-for-energy project.

But it has so far resisted pressure from domestic protesters to adopt a more assertive stance towards Israel – not least since the government is wary of putting its relationship with the US under stress and threatening the $1.45bn in annual aid it receives from Washington.

Jordan’s reliance on Israeli water supplies will also play a part in Amman’s calculus. The kingdom typically sources around 80% of its natural gas from Israel’s offshore Leviathan field.

Despite deep antipathy to Israeli Prime Minister Benjamin Netanyahu’s government, the reality is that Jordan is locked into a cooperative relationship with its neighbour, including through the Hashemite dynasty’s custodianship of the Al-Aqsa mosque compound in Jerusalem.

Economic effects

While Jordan is unlikely to take radical steps to change its relationship with its neighbour, it remains deeply impacted by Israel’s actions, with the economic implications of the conflict in Gaza being felt nationwide.

The Jordan Hotel Association reported that about half of its hotel reservations were cancelled in October 2023. Fitch Ratings expects that lower tourism inflows, weaker external demand and continued regional political uncertainty will slow growth to 2.3% in 2024, from 2.6% in 2023.

“Nevertheless, we expect that the decline in US and European tourists will be partly compensated by resilience in Jordanian expats and regional tourists. Before the start of the Gaza conflict, Jordanian expats and Arab and GCC tourists accounted for almost three-quarters of total visitors,” says Arispe.

Although the IMF warned in May that the continuation of the war and the trade route disruptions in the Red Sea are affecting sentiment, trade and tourism, barring a significant escalation, the Jordanian economy should be able to navigate the challenges.

While Jordan is primed to run a large current account deficit, at a projected 6.4% of GDP in 2024, this is still lower than the 6.8% deficit recorded in 2023.

According to Fitch, the general government deficit will ease to 2.6% in 2024 and 2.4% in 2025, as expenditure restraint will balance lower-than-budgeted revenue growth and higher interest payments.

“One of the main economic challenges for policymakers is to lift growth prospects to support a sustainable reduction in government debt,” says Arispe.

In its May rating affirmation, Fitch estimated that general government debt (consolidating central government debt holdings of the Social Security Investment Fund and including the Water Authority of Jordan debt and NEPCO guaranteed debt) rose to 93.3% of GDP at the end of 2023.

Although it forecast debt will decline to 91.3% by 2025, this will remain significantly above the projected 53.6% median for sovereigns rated ‘BB’.

“Jordan’s fiscal strategy aims to lower debt to 80% of GDP by 2028 based on a combination of revenue increases, through measures directed at broadening the tax base, and expenditure restraint,” says Arispe.

“Nevertheless, Fitch considers that the sustainability of the current fiscal strategy will depend on the success of reforms aimed at lifting growth prospects combined with increased employment.”

External support

For all the Hashemite kingdom’s vulnerability to regional conflicts, its strategic position also carries advantages. Jordan has attracted substantial external support in the past year, drawing on its status as a regional source of stability.

Early in 2024, the IMF began a new four-year, $1.2bn Extended Fund Facility (EFF).

“From a broader perspective, one of Jordan’s strengths in terms of creditworthiness is the strong relations with multilateral organisations and allies, including the US and partners in the region, which supports Jordan’s financing flexibility. The sovereign is projected to receive total foreign assistance of $3.5bn (6.5% of projected GDP) in 2024,” says Arispe.

In addition, Jordan is attracting significant Gulf investment. In late May, the country’s Investment Ministry announced that Abu Dhabi Development Holding Company (ADQ) had completed the establishment of an infrastructure investment fund company in Jordan. This deal was first mooted during King Abdullah’s visit to Abu Dhabi in 2023.

This company will invest in infrastructure and development projects worth $5bn.

The government also remains committed to its reform agenda, for example, by gradually increasing water utility tariffs last year.

“We expect, though, that the pace of reform progress will continue to depend on the objective of preserving social stability, the resistance of vested interests and institutional capacity constraints,” says Arispe.

Reducing high unemployment is a government priority, especially among women and younger people.

The government is moving ahead with the first phase of its ambitious Economic Modernisation Vision 2023-33, which aims to increase growth potential (5%) and create 1 million jobs over the next decade through higher private investment in strategic sectors.

“The authorities have made progress in terms of digitisation of government procedures, most notably those related to investment, and public administration reform,” says Arispe.

“Nevertheless, increased geopolitical risks make it harder for the government to achieve the 2025 targets under the Vision’s 2023-25 first phase, including reaching 3% growth and exports reaching $13.7bn.”

Above all, the government will hope that external events will not yet have a negative bearing on an ambitious political reform programme that is invariably contingent on favourable regional relations.

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James Gavin

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Nakheel awards $259m Dubai Islands buildings contract
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Saudi Energy, formerly Saudi Electricity Company, has announced revised electricity tariffs, with the new rates scheduled to take effect on 1 January 2027.

The revised tariff schedule, published on the company’s official website, covers residential, commercial, industrial, agricultural, charitable and government customers.

The largest percentage increase in consumption rates is 16.7%, for residential customers using up to 6,000 kilowatt-hours (kWh) a month. Residential customers will pay 21 halalas/kWh for monthly consumption of up to 6,000kWh, up from 18 halalas. For consumption above 6,000kWh, the rate will rise from 30 to 33 halalas/kWh, a 10% increase.

The industrial tariff will increase by 15%, from 20 to 23 halalas/kWh. Commercial customers, private healthcare facilities and private educational facilities will pay 25 halalas/kWh (up from 22 halalas) for consumption up to 6,000kWh a month, and 35 halalas/kWh above that level, up from 32 halalas.

Tariffs for charities and government customers will also increase. In addition to charges based on electricity consumption, customers will pay a fixed monthly fee determined by the capacity of their electricity metre. This replaces the previous separate charge for meter reading, maintenance and billing, with VAT applied to the revised tariffs.

Electricity investment

The new tariffs coincide with changes to water consumption tariffs announced by the National Water Company, also effective from 1 January 2027.

King Salman Bin Abdulaziz Al-Saud directed support measures following a proposal presented by Crown Prince and Prime Minister Mohammed Bin Salman Bin Abdulaziz Al-Saud.

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The tariff changes come as Saudi Arabia plans substantial investment in its electricity infrastructure. In September 2025, Saudi Energy announced plans to invest SR220bn ($58.7bn) in power infrastructure projects between 2025 and 2030.

A June 2025 report by Fitch Ratings forecast negative free cash flow of about SR16bn a year over the period and rising leverage, reflecting the financial demands of the programme.

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Dubai Municipality confirms AED3bn Tasreef drainage awards
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Dubai Municipality has confirmed it has awarded four contracts worth AED3bn ($817m) to expand the emirate’s stormwater drainage network by about 100 square kilometres under phase three of the Tasreef programme.

The projects will cover Jumeirah, Umm Suqeim, Al-Quoz, Al-Barsha, Al-Wasl and Al-Marmoom. The works include constructing and extending main stormwater drainage lines with diameters of up to three metres.

The four packages are part of Dubai’s AED30bn Tasreef programme, which aims to increase the emirate’s stormwater drainage capacity by 700% and reduce costs associated with pumping stations, network operations and maintenance by 20%.

The contracts have been awarded to China State Construction Engineering Corporation (CSCEC) and three local firms: Arifco Group, Nael Construction & Contracting (NCC) and Detech Contracting. Dubai Municipality did not state which projects the awards relate to.

According to sources, the contract awards include packages TF-15-C1, TF-15-C2 and TF-13-C1.

The first package, TF-15-C1, involves the construction of 21 kilometres of main and secondary drainage lines along Al-Wasl Road and in surrounding areas. It will cover Za’abeel 2, Al-Wasl, Jumeirah 1 and 2, Al-Bada’a, Al-Satwa and Dubai World Trade Centre. The estimated $100m contract was awarded to Detech in July, as exclusively reported by MEED.

The second package, TF-15-C2, covers the corridor between Sheikh Zayed Road and Al-Khail Road. It includes about 14km of main drainage lines serving Al-Quoz Industrial Areas 1, 3 and 4, and Al-Barsha 1. In July, MEED reported that CSCEC had won the engineering, procurement and construction contract for this project.

The third package, TF-13-C1, covers Al-Marmoom, where 23km of drainage infrastructure will be developed. According to a source, Arifco has been awarded this contract.

The final package covers Jumeirah and Umm Suqeim, where about 42km of main drainage lines will serve Umm Suqeim 1, 2 and 3; Umm Al-Sheif; Jumeirah 3; Al-Safa 1 and 2; and Al-Manara.

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Nakheel awards $259m Dubai Islands buildings contract
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The package covers 617 residential units across eight buildings, ranging from one to four bedrooms, together with basement structures, infrastructure and community amenities including swimming pools, sports courts and fitness centres.

Phase two comprises 360 homes across four buildings, with main construction scheduled for completion in late 2028.

Phase four includes 257 homes across four buildings, with completion targeted for the second quarter of 2029.

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The pipeline forms part of the government’s 2026-31 programme, presented to parliament last week.

The Marrakech-Agadir link is estimated to cost close to MD55bn ($5.5bn) and will cover a 240-kilometre (km) route through the High Atlas Mountains via Chichaoua. Civil engineering structures, including tunnels and viaducts, are expected to account for nearly 70% of the alignment.

In September, the government issued a decree declaring the Marrakech-Agadir and Chichaoua-Essaouira rail corridors to be of public utility, paving the way for land acquisition and expropriation procedures.

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The programme also includes developing regional express network services across five regions, electrifying the Fez-Oujda line and completing a freight rail link to the Nador West Med port.

Work on the Kenitra-Marrakech line had reached about 30% by May 2026, with commercial services targeted to begin in September 2029.

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Riyadh tenders King Salman Stadium works

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Saudi Arabia’s Sports Ministry has tendered a contract covering early works at King Salman International Stadium in Riyadh.

The scope includes enabling works, site preparation and initial construction activities.

The tender was issued on 11 October, with a submission deadline of 19 November.

The stadium will cover about 660,000 square metres (sq m) and seat 92,000. Facilities will include a 150-seat royal suite, 120 hospitality suites, 300 VIP seats and 2,200 dignitary seats.

The wider development will include sports facilities covering more than 360,000 sq m, including two training fields and fan zones; a closed sports hall; an Olympic-sized swimming pool; an athletics track; and outdoor courts for volleyball, basketball and padel.

The stadium is set to host the final of the 2034 Fifa World Cup and will serve as the Saudi national football team’s main base.

US-based architectural firm Populous is the lead architect for the stadium.

Construction of the stadium is expected to be completed by 2029.

The stadium will be located next to King Abdulaziz Park.

Firms submitted prequalification statements for the main design-and-build contract in February.

Saudi stadium plans

In August 2024, MEED reported that Saudi Arabia planned to build 11 new stadiums and refurbish four facilities for the 2034 Fifa World Cup.

Eight stadiums will be located in Riyadh, four in Jeddah and one each in Al-Khobar, Abha and Neom.

A further 10 cities will host training bases: Al-Baha, Jazan, Taif, Medina, Alula, Umluj, Tabuk, Hail, Al-Ahsa and Buraidah.

There are expected to be 134 training sites in the kingdom, including 61 existing facilities and 73 new venues.

Saudi Arabia was officially selected to host the 2034 Fifa World Cup during an online convention of Fifa member associations at the Fifa Congress on 11 December 2024.

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