On Wednesday, the Monetary and Credit Council of the Central Bank of Syria issued a decision permitting banks licensed by them to offer loans in foreign currencies for funding development investment projects within Syria. However, borrowers must meet 11 conditions to qualify.
The borrower must meet several conditions, including residency within Syria and payment of installments and interest in foreign currencies from accounts in locally licensed banks or those opened abroad. Additionally, the project must have export or service activities capable of generating foreign flows into the country.
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The lending bank is responsible for ensuring that the expected project flows cover the loan and interest value, as well as obtaining adequate repayment guarantees and verifying that the loan is used solely for the project’s intended purpose.
As per the Monetary Council’s decision, the lending bank is required to disburse foreign currency gradually based on a schedule linked to completion statements and their validity. Furthermore, the bank must take all necessary precautions to mitigate any risks that may arise from loan disbursement, including real estate financing.
According to Younis al-Karim, an economist and director of the “Economist” platform, the residency requirement within Syria creates a barrier for foreign companies and investors, forcing them to seek out a local partner who can meet the financial solvency requirements and bypass the real estate sales law. This, in turn, limits potential partners to a select few individuals affiliated with the Syrian regime, suggesting that the requirement is aimed at benefiting them specifically.
He suggests that the decision targets investment projects that have the potential to attract foreign currency inflows, which may not benefit the Syrian economy in the short term but could make a difference in the long run by helping to secure foreign exchange. However, he emphasizes that the primary goal of the decision is for the Syrian regime to create the illusion of an advanced banking structure to attract foreign investors. He further explains that the decision is intended to secure customers for banks operating in Syria and to support them with a group of investors who may be misled by the decision due to the unclear and uncertain political situation with some countries rushing to deal with the regime’s institutions.
This article was translated and edited by The Syrian Observer. The Syrian Observer has not verified the content of this story. Responsibility for the information and views set out in this article lies entirely with the author.