Jordan's Foreign Reserves: An Analysis

The Central Bank of Jordan recently announced that foreign currency reserves reached US$25.5 billion at the end of 2025, sufficient to cover more than nine months of goods and services imports. This coverage ratio has long served as a familiar benchmark in Jordan's economic discourse — but it is not the only internationally recognized measure of reserve adequacy. Stating that "reserves cover X months of imports" carries real weight, yet it is insufficient on its own to assess the Central Bank's capacity to defend the dinar's exchange rate.

The First Measure: The Import Coverage Standard. This metric remains highly relevant for Jordan specifically, given that the country is a structural importer of energy, food, industrial inputs, and capital goods. The most commonly asked question is: What is the internationally accepted minimum import coverage? The traditional rule of thumb sets the floor at three months of imports. However, this standard is outdated, better suited to economies with limited openness and minimal capital flows. Today — particularly for countries operating fixed or semi-fixed exchange rate regimes — substantially higher reserves are expected. In practice, three to five months is considered the minimum threshold; six to eight months is reasonably comfortable; and eight to ten months is regarded as strong.

By this measure, Jordan's 2025 coverage of approximately nine months is both comfortable and relatively strong. Statements made in early 2026 suggesting that reserves have approached US$ 28 billion, covering roughly ten months of imports, would place Jordan firmly in the "very strong" category.

The Second Measure: The Greenspan-Guidotti Rule (Debt Coverage). Beyond import coverage, there is another important global standard for assessing reserve adequacy relative to public debt — the Greenspan-Guidotti Rule. This rule holds that a country's reserves should fully cover 100% of its short-term external debt maturing within the coming year, including debt service obligations. A ratio below 100% signals external liquidity risk; a ratio well above 100% indicates a sound and secure position.

In Jordan's case, short-term external debt due in 2025 amounted to approximately US$ 3–4 billion. With reserves exceeding this figure more than sevenfold, Jordan's position under this standard is highly comfortable.

The Third Measure: Reserve-to-Broad-Money Ratio (Defending the Peg). Because the dinar has been pegged to the US dollar since 1995, Jordan's reserves must also be assessed against the risk that domestic depositors or institutions might seek to convert local currency holdings into dollars. This is measured by the reserve-to-broad-money ratio — the proportion of reserves relative to M2 (the broad money supply, or deposits convertible into foreign currency).

At the end of 2025, Jordan's domestic liquidity (M2) stood at JOD 47.7 billion, while foreign reserves were equivalent to approximately JOD 18.1 billion. This places the reserve-to-M2 ratio at roughly 38% — a strong reading, signaling that the Central Bank maintains meaningful cover against potential currency substitution pressures.

Importantly, this also underscores that the dinar's resilience rests not solely on the size of the reserve, but on the broader ecosystem of confidence: trust in the financial system, macroeconomic stability, and the Central Bank's skill in managing domestic liquidity.

The Fourth Measure: The IMF's Reserve Adequacy Assessment (The Gold Standard). The most comprehensive global benchmark is the IMF's Reserve Adequacy Assessment (ARA). Rather than relying on a single indicator, the ARA uses a composite metric that weighs four principal risk sources: export revenues, broad money supply, short-term external debt, and other external liabilities. For fixed exchange rate countries like Jordan, the required adequacy level is set higher than for floating-rate economies, since reserves must actively defend the currency peg.

Jordan's performance on this metric has improved markedly in recent years: 2018: Strong; 2019–2023: Very Strong; 2024: Very High; and 2025: Strong Surplus (350%) — among the highest ratios globally. By comparison, Egypt was rated (at or near the minimum threshold), Turkey (weak), and Morocco (adequate).

What Is the Right Reserve Level for Jordan? The practical safe floor for Jordan is no less than seven to eight months of import coverage. Given the structural characteristics of the Jordanian economy — the dollar peg, heavy dependence on imports, and reliance on remittances, grants, and tourism receipts — the optimal target range is eight to ten months.

However, as emphasized throughout, no single indicator tells the full story. A robust assessment must combine all four measures: Import coverage months — ideally eight to ten months; Short-term external debt coverage — ideally 100% or more; Reserve-to-broad-money ratio — ideally 30–40% for a pegged-currency economy; IMF ARA metric — ideally 100–150%, with Jordan currently at 350%

Conclusion: Based on 2025 data, Jordan's foreign reserves are both comfortable and strong by every meaningful international standard. The country covers nine months of imports, faces no external liquidity stress, holds reserves that dwarf its short-term external obligations, maintains a healthy reserve-to-money ratio, and has earned an IMF adequacy rating of "strong surplus" — placing it among the best-positioned economies in the world on this dimension.

In an era defined by global economic turbulence — from regional conflicts and supply chain disruptions to rising interest rates and volatile capital flows — the fundamental question for any economy is: can it withstand the pressure? For Jordan, the answer is an unequivocal yes.

These reserves are not merely statistics. They are a concrete guarantee of monetary stability — representing the capacity to finance imports, meet external obligations, and preserve the value of the dinar. At a time when several countries in the region face acute currency pressures, Jordan's position stands as a testament to disciplined fiscal stewardship and prudent monetary management.

But the true significance of these reserves extends beyond present-day protection. They are a platform for confidence — enabling the economy to pursue growth, attract investment, and navigate an uncertain global environment from a position of strength.

Stability, after all, is never accidental. It is the cumulative result of careful management, responsible policy, and sustained institutional credibility.

The article has been published in Jordan Times

https://jordantimes.com/opinion/yusuf-mansur/jordans-foreign-reserves-an-analysis