The Syrian Parliament has approved an expansionary budget for 2003 which forecasts an 18% increase in expenditure to S£420bn ($9.13bn – at a rate of $1=S£46), from S£356bn ($7.7bn) in 2002 (MEES, 14 January 2002). The document has been ratified by President Bashar al-Asad. Revenues for 2003 are forecast at S£294.7bn ($6.4bn), up 18.4% from S£249bn ($5.4bn) in 2002. The shortfall between expenditure and revenue of just over S£125bn ($2.7bn) is expected to be covered by foreign loans worth about S£18bn ($391mn) and approximately S£106bn ($2.3bn) in “withdrawals from the country’s reserves” which will make up the budget category of Exceptional Financing, thus balancing the budget. However, it is not entirely clear where these reserves will come from, although oil prices are expected to be higher in 2003, and this may help to cover some of the shortfall in the budget.

Spending will increase across the board, but government services in particular will see a substantial increase of 27.1% bringing their total spending budget to S£237.1bn ($5.15bn). Of this figure, a sizeable portion (28.3%) continues to be devoted to the National Security. Justice and Economy and Finance also represent substantial areas of spending. An encouraging sign is the 37.9% increase in spending on Higher Education and the 38.5% increase in Education spending, although the increases are from a relatively small base. Banking, Insurance and Real Estate is the only area of spending to see a fall of any size, while Construction and Transport both see a marginal decline in spending. Capital and current expenditure take an almost equal share of spending with capital expenditure rising 14.7% from S£184bn ($4bn) in 2002 to S£211bn ($4.6bn) in 2003, and current expenditure rising 21.2% from S£172.4bn ($3.7bn) in 2002 to S£209bn ($4.5bn).

Despite the overall rise in spending, economist Samir Seifan points out that much of the increase will go towards increasing wages and pensions which will rise by an average of 20%, with total salaries climbing to S£58bn ($1.3bn – 13.8% of budget spending) in 2003 from S£46bn ($1bn) in 2002. It is also estimated that 34,512 jobs will be created in the administrative sector, and 29,755 in the economic sector. This is due, at least in part, to the fact that Syria does not expect much new investment in 2003, and with more people joining the labor market each year, it is looking to soak up some of the pool of unemployed workers. This also explains why government investment through capital expenditure has increased. On a more positive note, however, Mr Seifan points out that servicing the country’s debt takes up only 7% of total budget revenue, although this figure omits the $7bn that Syria owes to Russia for past arms purchases.

The oil and gas sector represents an important part of Syria’s economy and budget. Oil revenues generated by production of some 560,000 b/d (MEES, 6 January) account for around 20% of GDP and 70% of exports, and are therefore an important foreign exchange earner. Government revenues from oil and gas in 2003 are forecast at S£152bn ($3.3bn), making up 51.6% of total budget revenues. The 2003 budget is based on an oil price assumption of $20/B for heavy crude and $24/B for light crude (MEES, 14 October). Government investment in the oil industry, however, is low, representing only 3.9% of total government expenditure (Mining expenditure which is entirely devoted to the oil sector is forecast at S£16.5bn). However, the sector is opening up to investment from IOCs in 2003.

Syrian Budgets: 2000-2003

(S£Mn)

__________

* Miscellaneous Revenues for 2002 have been revised to S£13,595mn (down S£55,030 from S£68,625), while Exceptional Financing for 2002 has been revised to S£106,814.54 (up S£68,573.2 from S£38,241.34).

** Percentage changes in Revenues do not exactly correspond to changes in Expenditure due to rounding.

Source : Syria – Official Gazette, Number 51, December 2002.

The economic picture for 2002 was reasonable, with growth reaching the government’s target of 3.35%, attributed by analysts to higher oil prices and increased trade with war-threatened Iraq. Furthermore, this rate of growth is expected to improve in 2003. Prices have remained stable, the government’s financial position has improved, and the balance of payments is in surplus. However, the overall picture is less reassuring, with the country laboring to shed the legacy of socialist economic policies and a centrally-planned economy very much controlled by the government. Furthermore, over the past year Syria has benefited from imports of about 200,000 b/d of oil from Iraq at discount prices which has freed up more of its own oil for export, and Iraq has become an important market for Syrian exports as trade has been freed up between the two countries. This arrangement is likely to be disrupted, though, in the event of a US-led war on Iraq, with negative consequences for the Syrian economy. 

While some progress has been made towards reform, the liberalization promised by President Asad has been proceeding at a snail’s pace. Much remains to be done to improve the investment climate in the country, and both encourage foreign direct investment and discourage capital flight. The banking sector is anachronistic and incapable of meeting the financial needs of a developed economy, and while reform for this sector is in the pipeline, no revolution in the financial sector is imminent. While these structural problems remain, Syria’s population continues to grow at a rate of 2.5%, and revenues are over-dependent on the proceeds from oil, the country will remain vulnerable to external shocks.

In order to tackle the problems which the Syrian economy faces, says Samir Seifan, there is a need for a growth strategy based on analysis of statistics which reflect the true state of the economy. The opacity of the budget statement and the lack of confidence in the figures presented in a budget which always balances illustrate the wider problems of the economy, and indicate some of the changes in political and business culture which must take place as the necessary reforms are being carried out. But with a potential war in neighboring Iraq getting closer by the day, continuing conflict in the occupied territories, and other political problems closer to home, the economy is some way down a busy agenda for President Asad, and it is unlikely that much-needed reforms will be speeded up any time soon.

© Copyright MEES 2004.

The Syrian Parliament has approved an expansionary budget for 2003 which forecasts an 18% increase in expenditure to S£420bn ($9.13bn – at a rate of $1=S£46), from S£356bn ($7.7bn) in 2002 (MEES, 14 January 2002). The document has been ratified by President Bashar al-Asad. Revenues for 2003 are forecast at S£294.7bn ($6.4bn), up 18.4% from S£249bn ($5.4bn) in 2002. The shortfall between expenditure and revenue of just over S£125bn ($2.7bn) is expected to be covered by foreign loans worth about S£18bn ($391mn) and approximately S£106bn ($2.3bn) in “withdrawals from the country’s reserves” which will make up the budget category of Exceptional Financing, thus balancing the budget. However, it is not entirely clear where these reserves will come from, although oil prices are expected to be higher in 2003, and this may help to cover some of the shortfall in the budget.

Spending will increase across the board, but government services in particular will see a substantial increase of 27.1% bringing their total spending budget to S£237.1bn ($5.15bn). Of this figure, a sizeable portion (28.3%) continues to be devoted to the National Security. Justice and Economy and Finance also represent substantial areas of spending. An encouraging sign is the 37.9% increase in spending on Higher Education and the 38.5% increase in Education spending, although the increases are from a relatively small base. Banking, Insurance and Real Estate is the only area of spending to see a fall of any size, while Construction and Transport both see a marginal decline in spending. Capital and current expenditure take an almost equal share of spending with capital expenditure rising 14.7% from S£184bn ($4bn) in 2002 to S£211bn ($4.6bn) in 2003, and current expenditure rising 21.2% from S£172.4bn ($3.7bn) in 2002 to S£209bn ($4.5bn).

Despite the overall rise in spending, economist Samir Seifan points out that much of the increase will go towards increasing wages and pensions which will rise by an average of 20%, with total salaries climbing to S£58bn ($1.3bn – 13.8% of budget spending) in 2003 from S£46bn ($1bn) in 2002. It is also estimated that 34,512 jobs will be created in the administrative sector, and 29,755 in the economic sector. This is due, at least in part, to the fact that Syria does not expect much new investment in 2003, and with more people joining the labor market each year, it is looking to soak up some of the pool of unemployed workers. This also explains why government investment through capital expenditure has increased. On a more positive note, however, Mr Seifan points out that servicing the country’s debt takes up only 7% of total budget revenue, although this figure omits the $7bn that Syria owes to Russia for past arms purchases.

The oil and gas sector represents an important part of Syria’s economy and budget. Oil revenues generated by production of some 560,000 b/d (MEES, 6 January) account for around 20% of GDP and 70% of exports, and are therefore an important foreign exchange earner. Government revenues from oil and gas in 2003 are forecast at S£152bn ($3.3bn), making up 51.6% of total budget revenues. The 2003 budget is based on an oil price assumption of $20/B for heavy crude and $24/B for light crude (MEES, 14 October). Government investment in the oil industry, however, is low, representing only 3.9% of total government expenditure (Mining expenditure which is entirely devoted to the oil sector is forecast at S£16.5bn). However, the sector is opening up to investment from IOCs in 2003.

Syrian Budgets: 2000-2003

(S£Mn)

__________

* Miscellaneous Revenues for 2002 have been revised to S£13,595mn (down S£55,030 from S£68,625), while Exceptional Financing for 2002 has been revised to S£106,814.54 (up S£68,573.2 from S£38,241.34).

** Percentage changes in Revenues do not exactly correspond to changes in Expenditure due to rounding.

Source : Syria – Official Gazette, Number 51, December 2002.

The economic picture for 2002 was reasonable, with growth reaching the government’s target of 3.35%, attributed by analysts to higher oil prices and increased trade with war-threatened Iraq. Furthermore, this rate of growth is expected to improve in 2003. Prices have remained stable, the government’s financial position has improved, and the balance of payments is in surplus. However, the overall picture is less reassuring, with the country laboring to shed the legacy of socialist economic policies and a centrally-planned economy very much controlled by the government. Furthermore, over the past year Syria has benefited from imports of about 200,000 b/d of oil from Iraq at discount prices which has freed up more of its own oil for export, and Iraq has become an important market for Syrian exports as trade has been freed up between the two countries. This arrangement is likely to be disrupted, though, in the event of a US-led war on Iraq, with negative consequences for the Syrian economy. 

While some progress has been made towards reform, the liberalization promised by President Asad has been proceeding at a snail’s pace. Much remains to be done to improve the investment climate in the country, and both encourage foreign direct investment and discourage capital flight. The banking sector is anachronistic and incapable of meeting the financial needs of a developed economy, and while reform for this sector is in the pipeline, no revolution in the financial sector is imminent. While these structural problems remain, Syria’s population continues to grow at a rate of 2.5%, and revenues are over-dependent on the proceeds from oil, the country will remain vulnerable to external shocks.

In order to tackle the problems which the Syrian economy faces, says Samir Seifan, there is a need for a growth strategy based on analysis of statistics which reflect the true state of the economy. The opacity of the budget statement and the lack of confidence in the figures presented in a budget which always balances illustrate the wider problems of the economy, and indicate some of the changes in political and business culture which must take place as the necessary reforms are being carried out. But with a potential war in neighboring Iraq getting closer by the day, continuing conflict in the occupied territories, and other political problems closer to home, the economy is some way down a busy agenda for President Asad, and it is unlikely that much-needed reforms will be speeded up any time soon.

© Copyright MEES 2004.

The Syrian Parliament has approved an expansionary budget for 2003 which forecasts an 18% increase in expenditure to S£420bn ($9.13bn – at a rate of $1=S£46), from S£356bn ($7.7bn) in 2002 (MEES, 14 January 2002). The document has been ratified by President Bashar al-Asad. Revenues for 2003 are forecast at S£294.7bn ($6.4bn), up 18.4% from S£249bn ($5.4bn) in 2002. The shortfall between expenditure and revenue of just over S£125bn ($2.7bn) is expected to be covered by foreign loans worth about S£18bn ($391mn) and approximately S£106bn ($2.3bn) in “withdrawals from the country’s reserves” which will make up the budget category of Exceptional Financing, thus balancing the budget. However, it is not entirely clear where these reserves will come from, although oil prices are expected to be higher in 2003, and this may help to cover some of the shortfall in the budget.

Spending will increase across the board, but government services in particular will see a substantial increase of 27.1% bringing their total spending budget to S£237.1bn ($5.15bn). Of this figure, a sizeable portion (28.3%) continues to be devoted to the National Security. Justice and Economy and Finance also represent substantial areas of spending. An encouraging sign is the 37.9% increase in spending on Higher Education and the 38.5% increase in Education spending, although the increases are from a relatively small base. Banking, Insurance and Real Estate is the only area of spending to see a fall of any size, while Construction and Transport both see a marginal decline in spending. Capital and current expenditure take an almost equal share of spending with capital expenditure rising 14.7% from S£184bn ($4bn) in 2002 to S£211bn ($4.6bn) in 2003, and current expenditure rising 21.2% from S£172.4bn ($3.7bn) in 2002 to S£209bn ($4.5bn).

Despite the overall rise in spending, economist Samir Seifan points out that much of the increase will go towards increasing wages and pensions which will rise by an average of 20%, with total salaries climbing to S£58bn ($1.3bn – 13.8% of budget spending) in 2003 from S£46bn ($1bn) in 2002. It is also estimated that 34,512 jobs will be created in the administrative sector, and 29,755 in the economic sector. This is due, at least in part, to the fact that Syria does not expect much new investment in 2003, and with more people joining the labor market each year, it is looking to soak up some of the pool of unemployed workers. This also explains why government investment through capital expenditure has increased. On a more positive note, however, Mr Seifan points out that servicing the country’s debt takes up only 7% of total budget revenue, although this figure omits the $7bn that Syria owes to Russia for past arms purchases.

The oil and gas sector represents an important part of Syria’s economy and budget. Oil revenues generated by production of some 560,000 b/d (MEES, 6 January) account for around 20% of GDP and 70% of exports, and are therefore an important foreign exchange earner. Government revenues from oil and gas in 2003 are forecast at S£152bn ($3.3bn), making up 51.6% of total budget revenues. The 2003 budget is based on an oil price assumption of $20/B for heavy crude and $24/B for light crude (MEES, 14 October). Government investment in the oil industry, however, is low, representing only 3.9% of total government expenditure (Mining expenditure which is entirely devoted to the oil sector is forecast at S£16.5bn). However, the sector is opening up to investment from IOCs in 2003.

Syrian Budgets: 2000-2003

(S£Mn)

__________

* Miscellaneous Revenues for 2002 have been revised to S£13,595mn (down S£55,030 from S£68,625), while Exceptional Financing for 2002 has been revised to S£106,814.54 (up S£68,573.2 from S£38,241.34).

** Percentage changes in Revenues do not exactly correspond to changes in Expenditure due to rounding.

Source : Syria – Official Gazette, Number 51, December 2002.

The economic picture for 2002 was reasonable, with growth reaching the government’s target of 3.35%, attributed by analysts to higher oil prices and increased trade with war-threatened Iraq. Furthermore, this rate of growth is expected to improve in 2003. Prices have remained stable, the government’s financial position has improved, and the balance of payments is in surplus. However, the overall picture is less reassuring, with the country laboring to shed the legacy of socialist economic policies and a centrally-planned economy very much controlled by the government. Furthermore, over the past year Syria has benefited from imports of about 200,000 b/d of oil from Iraq at discount prices which has freed up more of its own oil for export, and Iraq has become an important market for Syrian exports as trade has been freed up between the two countries. This arrangement is likely to be disrupted, though, in the event of a US-led war on Iraq, with negative consequences for the Syrian economy. 

While some progress has been made towards reform, the liberalization promised by President Asad has been proceeding at a snail’s pace. Much remains to be done to improve the investment climate in the country, and both encourage foreign direct investment and discourage capital flight. The banking sector is anachronistic and incapable of meeting the financial needs of a developed economy, and while reform for this sector is in the pipeline, no revolution in the financial sector is imminent. While these structural problems remain, Syria’s population continues to grow at a rate of 2.5%, and revenues are over-dependent on the proceeds from oil, the country will remain vulnerable to external shocks.

In order to tackle the problems which the Syrian economy faces, says Samir Seifan, there is a need for a growth strategy based on analysis of statistics which reflect the true state of the economy. The opacity of the budget statement and the lack of confidence in the figures presented in a budget which always balances illustrate the wider problems of the economy, and indicate some of the changes in political and business culture which must take place as the necessary reforms are being carried out. But with a potential war in neighboring Iraq getting closer by the day, continuing conflict in the occupied territories, and other political problems closer to home, the economy is some way down a busy agenda for President Asad, and it is unlikely that much-needed reforms will be speeded up any time soon.

© Copyright MEES 2004.