Each time regional challenges escalate or global economic pressures increase, the same question resurfaces: Will the Jordanian dinar hold up? However, the real answer does not come from immediate fears or circumstantial estimates, rather from an objective reading of economic history, a history that clearly demonstrates that this currency was not tested during easy times, but in the most severe moments, and emerged from them with increased resilience.
The Jordanian economy has undergone pivotal moments that could have confused stronger currencies. In the late 1980s, Jordan faced a severe crisis where the dinar lost more than half its value, amidst external debt exceeding 200% of GDP, a financial deficit over 20%, and a deep economic recession. Only months passed before the Gulf War added a compounded shock, characterized by the return of hundreds of thousands of Jordanians, a decline in remittances, rising energy costs, and unprecedented pressure on the reserves. Despite the fragile economic environment at the time, the dinar managed to maintain its relative stability, a feat attributable to a monetary policy that was still in the process of rebuilding trust.
Then came the global financial crisis of 2008, which toppled major financial institutions and plunged the global economy into a severe recession. Although Jordan was not at the center of the storm, it was affected by a decline in investments and a drop in global liquidity, where growth fell from 7.2% to 2.3% within a single year, and foreign investment flows decreased by more than half. Nevertheless, the dinar remained stable, at a time when many currencies faced severe pressures.
The Arab Spring was no less severe, as the Jordanian economy during that period faced a compound shock combining energy supply disruptions, rising energy bills to about 20% of the output, and the influx of more than 1.3 million refugees, alongside slowing growth and widening deficits and rising public debt to more than 90% of the output. Yet, the exchange rate stability continued without significant fluctuations, supported by reserves ranging between $10 and $15 billion, and a cautious monetary policy that maintained balance.
The coronavirus pandemic posed a different kind of test, as it was not a traditional financial crisis, but a near-complete halt of global economic activity. The Jordanian economy contracted by about 1.6%, tourism revenues declined by more than 70%, and the deficit, public debt, and unemployment rose to prominent levels. Nonetheless, the dinar maintained its stability, supported by reserves ranging between $16 and $18 billion, covering up to ten months of imports, and by a flexible monetary management that supported the economy without compromising market confidence.
If we move from reading the history to analyzing current market behavior, an important implication emerges reflecting the depth of confidence in the Jordanian dinar, represented by a dollarization rate of only about 18%, a rate that places Jordan among the monetarily stable economies, much less than countries that have experienced pressures on their currencies such as Turkey and Lebanon, and even close to stable economies in the region. This ratio means that the majority of savings within the banking system are still valued in dinar, reflecting a deeply-rooted confidence in the national currency, and confirming that the stability of the dinar is no longer just the result of monetary policies, but has become a steady economic behavior for individuals and institutions.
These indicators gain their importance not from the number itself, but from their implication in a regional moment characterized by rising levels of uncertainty, where markets typically tend to hedge with foreign currencies. Nonetheless, the Jordanian dinar continues to maintain its position as a store of value, reflecting the success of the monetary policy in managing expectations, enhancing confidence, and limiting the phenomena of monetary substitution that often accompany crises.
What distinguishes the present moment is not just that the dinar has held up in the past, but that the Jordanian economy today is more immune than it has been at any previous stage. Foreign reserves have reached levels exceeding $28 billion, covering between ten to eleven months of imports, and monetary policy has become more advanced and flexible, while the banking sector has become more robust and subject to regulation, and more importantly, confidence in the dinar has turned into a stable market behavior, not just a circumstantial response to crises.
Despite the ongoing challenges linked to geopolitical tensions, fluctuations in energy prices, and global economic pressures, these challenges appear less intense and less complex compared to what Jordan faced in previous stages, whether in terms of the magnitude of direct shocks or the depth of financial imbalances or the degree of uncertainty. This makes dealing with them closer to risk management rather than facing existential crises.
The resilience of the Jordanian dinar has never been a circumstantial result or the outcome of a single factor, but is the product of an integrated system based on cautious and trusted monetary policy led by the Central Bank of Jordan, which relies on linking the currency to the dollar as an anchor for stability, effective management of reserves, and maintaining trust locally and internationally. This stability also relies on comfortable foreign reserves, forming the first line of defense against external shocks, and on wise management of expectations, where Jordan has succeeded in stabilizing market behavior, curbing speculation, and enhancing the status of the dinar as a store of value.
Ultimately, the strength of the Jordanian dinar cannot be read in isolation from this institutional and policy accumulation. This currency did not hold up by chance, but through a long path of discipline and confidence and building the ability to manage crises. From here, a fundamental truth emerges that the Jordanian dinar has passed much tougher tests, and emerged from them stronger.
