The IMF and the Syrian Central Bank yesterday reaffirmed the
importance of the countrys economic liberalization,
despite the limited effect of the global crisis due to
Syrias relative isolation.
Khaled Sakr, the IMFs mission chief for Syria, told
Emerging Markets from Washington: The low level
of integration of the Syrian financial sector [...] has
contributed to a limited impact of the global crisis.
However, economic liberalization brings with it many
opportunities. Syria has already been gradually moving to a
market-based economy and this is likely to continue.
Adib Mayaleh, the governor of the Syrian Central Bank, said
Syria would introduce VAT in 2010, after a years delay
for technical reasons. The move has been identified
by the IMF as the key change in taxation reform.
In the world of banking, you cannot have
isolation, Mayaleh told Emerging Markets in Istanbul.
At the same time you should have strict regulation
and this is why we had few problems in Syria.
Mayaleh put economic growth at 5% in 2009 and 6% in 2010,
higher than the IMF projections of 3% and 4.2%.
Syrias huge state sector has been partially reformed
under the presidency of Bashar al-Assad since 2000. But 2
million from a population of 20 million are employed in the
An IMF staff report published early this year highlighted
the challenge presented by diminishing revenue from oil as
Sakr praised the Syrian authorities success in
maintaining a fiscal deficit at around 5% of GDP despite
lower oil revenues, as production has fallen to 380,000 barrels
a day from 590,000 barrels a day in 1996.
The authorities fiscal consolidation efforts
have helped reduce the non-oil deficit and stabilize the
overall deficit despite the downward trend in oil
revenue, he said.
The fiscal outlook is expected to remain broadly
stable over the medium term, and the public debt to remain at a
sustainable level in view of the planned reforms.
The decline in net oil balance, together with a poor
performance in the agriculture sector due to severe drought,
has produced a trade deficit that the IMF puts at $3 billion in
Mayaleh said that the Central Bank had developed a
clear function and some independence since he
became governor in 2005. He said overall banking deposits
including both state banks, and the 15 private banks
opened since 2004 had increased since 2005 by
two-and-a-half times in Syrian pounds and by seven times in
The IMF, which will send a team to Damascus next month for
Article IV consultations, has identified the reduction of state
subsidies as a priority.
Subsidies ... are often associated with price
distortions and can lead to inefficiencies in production and
consumption patterns, said Sakr. Furthermore, they
are often not well-targeted, which results in high fiscal costs
and sometimes insufficient support for the vulnerable
Syria last year began a programme to phase out fuel
subsidies by increasing diesel and petrol prices, easing the
impact on poorer households by issuing them with coupons.
Syrias commitment to change, Mayaleh said, meant it
was ready for such decisions that were not easy to
take. There has been big resistance to
change, he said. We must change the mentality, and
this cannot happen suddenly. We are working on this very