The Mujib Dam in Wadi al Mujib between Madaba and Karak was finished in 2004. It provides part of the water supply of Amman, Jordan. Photo via Flickr taken by David Stanley on 25 March 2017.
How can Jordan achieve water tariff reforms despite rising costs?
As Jordan invests in upgrading its water infrastructure, the cost of providing water is set to rise. While tariffs have increased, revenues still fall short of meeting the government’s target of cost recovery in the sector by 2030. Comprehensive subsidy reforms may be necessary to ensure a sustainable and politically feasible path towards water security.
What is the current water tariff structure for households in Jordan?
In Jordan, the government subsidises municipal water in order to lower the cost for citizens. The government employs a tiered tariff system for household water: based on consumption, citizens pay anywhere from 225 to 525 piastres (JOD 0.225 to 0.525) per cubic metre (equivalent to 1,000 litres) of water.
These subsidies are based on water usage, with the lowest volume consumers receiving the highest level of subsidies. While this method is intended to be a rough proxy for household income, it often serves to disadvantage the poorest citizens, who tend to have larger families and thus to consume more water.
Financial imbalances in Jordan’s water sector
As part of its commitment to achieve cost recovery by 2030, the government has been slowly raising water tariffs for domestic consumers on an annual basis, while working to lower water production costs. Over the past year, it has significantly reduced water loss, cracked down on theft, and decreased energy consumption.
As a result, the cost to the government per cubic metre of water has decreased from JOD 2.16 in 2021 to JOD 1.93 in 2024. At the same time, as a result of the increasing tariff rates, citizens now shoulder a growing share of water costs. In 2021, domestic consumers paid just over a third of the real cost of their water; today, they pay nearly 60%.
Figure 1: Subsidy and revenue as a share of water production cost in Jordan
Notes: This graph compares subsidies and revenues from households as a share of total water production costs in 2021 and 2024. It shows that, while domestic consumers previously covered just over one-third of real water costs, in 2024, they paid almost 60%. Figure generated by the author.
However, despite recent tariff increases, current water revenues still fall short of covering the full operational and maintenance costs of Jordan’s municipal water services. This vulnerability is particularly salient given the external pressures the sector faces, most notably rising electricity prices. Energy demands are also expected to grow substantially with an upcoming desalination and conveyance project, which will put additional strain on the budget.
The National Conveyance Project is likely to increase the deficit
While Jordan has moved closer to cost recovery in its energy sector, having eradicated fuel subsidies and improved targeting of subsidies for electricity, the deficit in the water sector risks increasing further in the coming years.
The government is currently raising funds for the National Conveyance Project (NCP), which promises to transform Jordan’s water provision, desalinating 300 million cubic metres of seawater annually from the Gulf of Aqaba and pumping it to Amman, where 40% of the country’s population resides. The USD 6 billion capital expenditure on this project is likely to compound the sector’s deficit.
While the project promises to provide Jordan with a sustainable source of water, it also threatens to raise water costs. The project will be structured as a ‘build-operate-transfer’ agreement, and is being financed through a combination of private investment, international grants, and concessional loans. The cost of desalinated water from Aqaba is forecasted to be higher than the cost of imported and drilled water, on which the kingdom currently relies.
While the government is raising municipal water tariffs by 4.6% annually until the NCP begins to operate in 2030, these increases may not be enough to meet the higher costs associated with desalinating and pumping water.
Jordan’s neighbours have reformed subsidies to varying degrees of success
Governments across the Middle East have attempted subsidy reforms, with mixed results. Saudi Arabia, which relies heavily on desalination for its water provision, sought to reduce its expenditures as mounting electricity costs made subsidising water increasingly expensive for the government.
However, due to the rapid implementation and lack of citizen awareness, there was significant opposition to this plan, and the government stopped short of achieving cost recovery.
When Iran initiated its energy subsidy reforms in 2010, the government started with universal cash transfers and used the increased revenue to support domestic industries. However, a sudden price increase in 2019 led to destabilising protests, undermining the government’s credibility at a key moment.
Morocco presents a model of comprehensive subsidy reform in a similar political and economic environment to Jordan. Beginning in 2012, the government deployed a comprehensive communications strategy designed to explain the financial necessity of the reform, the government’s efforts to protect the poor, and the benefits of the new system to citizens.
Moreover, by scaling up existing social protection programmes, the government was able to offset the impact of rising prices without the costs associated with creating a new distribution mechanism. Ultimately, the government was able to eliminate all subsidies, except for those on commodities, by 2021.
Evidence-based strategies can support Jordan’s water sector reforms
These experiences across country contexts have revealed a set of strategies that are most likely to lead to enduring subsidy reform in Jordan:
- Effective messaging: Reforms succeed when the public understands why change is needed. Explaining the costs of the current system and how reform improves services can help build support for the reform.
- Improved targeting: Subsidy reform should be paired with measures like direct cash transfers to protect low-income households. Jordan's National Aid Fund could help deliver further targeted support without the need for new infrastructure.
- Gradual price increases: Gradually increasing prices gives citizens time to adjust and allows the government to implement mitigating measures to ease the burden of the reform.
Jordan’s water sector stands at a critical juncture. As prices rise and new infrastructure is introduced, implementing equitable and politically feasible reforms will become essential. By learning from its regional peers and emphasising transparency, targeted support, and gradual change, Jordan can chart a sustainable path towards water security.