The municipal bond as a pillar of local economic reform

Municipalities in Jordan are confronted with significant obstacles, the most formidable being the weakness of local administrations in policymaking, particularly in light of ongoing changes to local administration law that have made virtually no positive difference in developing a legislative foundation for these vital institutions. اضافة اعلان

Another struggle faced on the municipal level in Jordan is the impact of the Syrian refugee crisis, which has exacerbated other issues as local communities host refugees and administrations fail to capitalize on positive characteristics of the crisis or to collaborate to develop an economic and social foundation by utilizing the huge grants obtained by the local government sector from donor countries.

The Kingdom’s municipalities are in a bad financial state, and this has, in turn, harmed local infrastructure. The majority of towns have turned to loans, creating another problem for Jordan's economy — according to the Ministry of Local Administration's most recent report, municipal debt stood at about JD350 million in 2022.

The majority of towns have turned to loans, creating another problem for Jordan's economy — according to the Ministry of Local Administration's most recent report, municipal debt stood at about JD350 million in 2022.

Such figures and realities show the need for a detailed analysis of the situation, specifically involving: an evaluation of the horizontal fiscal imbalances among municipalities, a renewed study of the ability of municipalities in Jordan to manage their financial resources, and the establishment of a professional database that serves as a repository and clearing house for mayors.

The US municipal bonds modelIn 2006, I visited the US through the international leadership visitor program (ILVP). The trip was both extensive and an important learning experience, teaching me about many issues related to local administration policies and governance — especially the importance of municipal financing.

It was in 2021 that I first suggested integrating new financial policies into the Kingdom’s municipal sector and leveraging bonds, in line with the American practice, as one of many solutions for solving local infrastructure financing challenges. 

For those unfamiliar, "muni-bonds" are debt instruments issued by local governments or larger entities like states and school districts to finance infrastructure projects such as new schools, roads, sewer systems, airports, and hospitals.

Under the US system, buying municipal bonds is analogous to lending money to a "borrower", where no federal taxes are due on the interest received from the bond's issuer. State-issued municipal bonds may also be exempt from state and local taxes. The “borrower” typically pays the bondholder a set sum biannually, and the principal will be fully repaid by the end of the loan period.

Transparent accountingHaving a successful bond financing system, as exemplified by the US, could help in overcoming many challenges to municipal financial assets, among them the key issue of transparency. Municipal bonds would to be subject to regulations under which the public would regularly be given access to municipal budgets and financial and summary reports. Such reports and statements would also be regularly distributed to other levels of government, meaning that municipal financial management would be transparent and have more community involvement.

Having a successful bond financing system, as exemplified by the US, could help in overcoming many challenges to municipal financial assets, among them the key issue of transparency.

Furthermore, standards for governmental accounting and financial reporting would be developed to allow municipalities to formulate accurate estimates for revenues and expenditures and keep track of financial records in real-time, with frequent auditing.

At this point, the proper management of Jordan's municipal financial tools and policies is crucial to prevent problems that could affect local operations and pose significant barriers to the growth of communities. Instead of just giving the topic a cursory glance, we need a thorough understanding of the issues that our towns are facing — and innovative solutions that will help forge the path ahead to strong local development.


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