Amid regional tensions, there is much talk about war and its effects. Still, the most important economic question for Jordan is not military, but purely financial: How much can the budget sustain if the crisis drags on?

 

So far, Jordan is not facing an energy supply crisis. Electricity is available, and supplies have not been interrupted. But the real challenge lies in the cost of this energy. Official estimates indicate that the government is incurring additional costs in the energy sector, ranging between JOD 2.5 million and JOD 3 million daily, due to rising fuel prices and the need to switch to more expensive alternatives for electricity generation.

 

Thenumber of JOD 3 million, despite its apparent simplicity, means (based on current oil and gas prices) that every additional day of the war places a direct burden on Jordan's public finances. If translated over time, just one month would mean approximately 90 million dinars, and this figure could reach JOD 270 million within three months, exceeding half a billion dinars if the crisis lasts for six months and energy costs do not rise further than their current level.

 

But these figures cannot be interpreted in isolation. Jordan enters this crisis already operating within a limited fiscal space (fiscal inflexibility), with a budget deficit approaching 5% of GDP and a public debt hovering around 88% of GDP (excluding the amount borrowed from the Social Security Fund). The current figures are manageable under normal circumstances, but they become more vulnerable in the face of external shocks.

 

To understand the situation more accurately, it is necessary to consider the potential scenarios for the war's sustainability, adhering to the principle of "if you want to predict, predict a lot." The most likely assessment at present is that the war will not be very short, nor fully all-out, but rather will take the form of a limited, prolonged escalation. This scenario, which could last between two and four months, carries a probability,according to research institutes, of approximately 50% to 60%, and is the basis for most international economic analyses.

 

In this scenario, the cost of additional energy could rise to around JOD 270 million within three months, potentially pushing the deficit to 5.5% or more and gradually increasing the debt ratio. Economic growth is also expected to slow to between 1.8% and 2.1%, due to rising costs and a decline in some sectors, particularly tourism.

 

If the crisis is short (for example, one month), the impact remains relatively limited. The deficit will rise slightly, and growth will slow down slightly, but the economy can absorb the shock. This scenario has a lower probability, around 25% to 30%.

 

Conversely, there remains a more negative scenario: a regional expansion of the war and its continuation for a longer period. This scenario, although less likely (15% to 25%), has a much greater impact. The deficit could rise to 6% or more, and debt could approach 90% of GDP, with growth slowing to 1% or less.

 

There is a final scenario, less likely but would be the costliest: a long and comprehensive war. In this case, the deficit could exceed 7%, and debt could approach 91% or more, with very weak or near-zero growth. However, this scenario is still far from the baseline forecasts at present.

 

What do these scenarios mean in practical terms? They mean that the real danger lies not in the daily figure (JOD 3 million), but in the accumulation of this amount over time. One month means manageable financial pressure, three months means clear economic pressure, but six months or more could mean a shift in the course of public finances.

 

In this context, the government's decision not to pass on the price increases directly to citizens is understandable. This decision protects domestic demand, prevents inflation from spreading rapidly through the economy, and maintains social stability. However, it also means that the state is effectively postponing the cost rather than eliminating it. Herein lies the paradox: the government's success today in protecting citizens from price hikes is offset by increasing pressure on the budget in the future.

 

Is this decision correct? In crises, it is often correct. Immediately passing on the shock could lead to sharp inflation and a greater economic slowdown (stagflation). But this option cannot be sustained indefinitely without a cost. It requires economic flexibility: a change not only in the types of energy we consume, but also in how, where, and by whom goods are produced.

 

Therefore, the real challenge is not in paying the cost, but in managing it—that is, how to distribute it over time, mitigate its impact, and reduce its recurrence in the future. Ultimately, Jordan is not facing an energy crisis, but a price crisis, and this is a crucial distinction. The first crisis (energy) means an economic standstill, while the second (prices) means financial pressure that can be managed, but cautiously. Wars aren't fought only on battlefields; they're financed in budgets and felt in prices.

 

The most important message today is this: the situation is under control in terms of energy availability, but it's financially costly. The shorter the crisis, the more limited its impact will be. If it lasts longer, the question will shift from: How much are we losing daily? To: How much can we endure before we change our policies?

 

*The writer is a former Minister of State for Economic Affairs in Jordan