For the past two years, the Syrian government has been making efforts to reassess its approach to the state budget deficit. This deficit has been expanding year after year due to diminishing sources of public revenue, substantial tax evasion, and inadequate digitization of public fund management within Syria.
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The Syrian government has long been in need of a timely shift in its fiscal strategy concerning the financing of the state’s budget deficit. This particularly pertains to the employment of public debt securities, a fiscal policy utilized by countries worldwide to finance various public expenditures, particularly those related to investments.
How will the government finance the deficit?
Due to the fiscal deficit, the Syrian government, in collaboration with the Ministry of Finance and the Central Bank, has initiated measures to finance a portion of the public budget shortfall. This involves the issuance of public treasury bonds and bills, aimed at raising funds and minimizing reliance on borrowing from the Central Bank. It is important to note that the issuance of government bonds is regulated by Legislative Decree No. 60 of 2007 in Syria.
Trying to borrow 600 billion SYP
The Syrian government aims to secure a borrowing amount of approximately 600 billion Syrian pounds (equivalent to around 92 million dollars based on the official exchange rate of 6,500 pounds to the dollar set by the Central Bank of Syria). This borrowing will be implemented in four installments throughout the year 2023, as stated in the government’s financial statement pertaining to the 2023 budget.
Second Auction
On May 22, 2023, the Syrian Ministry of Finance concluded the necessary procedures for the second government securities auction of the year. This auction offered four-year treasury bonds that will mature in May 2028. As a result of this auction, the government successfully borrowed 124 billion liras, equivalent to approximately $19 million at the official exchange rate of 6,500 pounds to the dollar set by the Central Bank of Syria. The bonds will carry an annual interest rate of 9.93 percent, calculated based on a nominal value of two million liras. The government will make semi-annual interest payments to bondholders as per the scheduled timeline.
Prior to this, the Syrian Ministry of Finance had already completed the procedures for the first government securities auction of 2023. On March 6, the ministry issued five-year treasury bonds, securing loans worth 68 billion liras, approximately $15 million at an official exchange rate of 3,500 liras to the dollar at that time. The bonds offered an interest rate of 9.83 percent, based on a nominal value of two million liras.
Consequently, the total amount borrowed by the Syrian government through public debt securities thus far stands at 192 billion Syrian pounds.
Bond Trading
The Syrian government has authorized the trading of these government securities for sale and purchase on the Damascus Securities Exchange, in accordance with the registration, deposit, and trading system for treasury bonds outlined in No. 1622/2022 regulation. This enables investors to engage in transactions involving these securities within the established framework of the Damascus Securities Exchange.
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.
