Annual Report on Exchange Arrangements and Exchange Restrictions 2005


International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of January 31, 2005)

Status Under IMF Articles of Agreement
Article XIVYes.
Exchange Arrangement
CurrencyThe currency of the Syrian Arab Republic is the Syrian pound.
Exchange rate structure
MultipleThe exchange rate system consists of several rates:
First, the legally designated official rate of LS 11.20/11.25 per $1 applies to the repayment of loans and interest arising from bilateral payments agreements. Second, effective January 1, 2005, the exchange rate for the state and public sector was devalued to LS 50 per $1. Previously, from January 3, 2004, this exchange rate was LS 48.50/48.65 per $1. This rate unified (1) the budget accounting rate that applied to public sector exports of petroleum, all government imports (including essential subsidized products and invisibles), and repayment of loans and interest payments not related to bilateral payments agreements; and (2) the “rate in neighboring countries” (the commercial rate) that applied mainly to public commercial transactions, including (a) remittances abroad and payments by the public sector that are approved by the Committee for Foreign Exchange; and (b) all public sector enterprise foreign exchange transactions. Third, the “free exchange rate for private sector transactions” is an official exchange rate that is set to reflect developments in the free market exchange rates in Beirut, Lebanon, and Amman, Jordan. This rate is used for foreign exchange sales by the Commercial Bank of Syria (ComBS) and, effective January 7, 2004, by all authorized banks, for limited noncommercial transactions (e.g., medical, student, religious, and travel expenses); the extension of credit to importers of raw materials needed for exports; salaries of staff of UN and diplomatic missions in the Syrian Arab Republic; and domestic expenses of foreign oil companies. All noncommercial transactions may be effected at this rate. Fourth, the unofficial rate is the “free market rate,” which is the rate in certain cities in the region (mainly Amman and Beirut) and in Syria that applies to (1) private sector import payments; (2) private sector remittances and services receipts and payments; and (3) private capital flows. The free market rate is determined by private supply and demand, with market participants matching their needs through brokers or dealers in the offshore market.
Conventional pegged arrangementThe official rate is pegged to the dollar.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
Arrangements for Payments and Receipts
Prescription of currency requirementsThe Exchange Office (EO) prescribes exports to all countries in any convertible currency. Prescription of currency requirements is not applied to outgoing payments. All payments to, and receipts from, Israel are prohibited. With a few exceptions, non-Syrians visiting the Syrian Arab Republic are required to settle their first- and secondclass international hotel bills in foreign exchange.
Use of foreign exchange among residentsIt is permitted through authorized banks.
Payments arrangements
Bilateral payments arrangements
InoperativeThere are agreements with Russia and Sri Lanka.
Administration of controlThe Ministry of Economy and Trade (MOET) determines policy with regard to imports and exports and issues import licenses. The EO issues exchange licenses for invisibles and capital transactions.
International security restrictionsn.a.
Payments arrears
Controls on trade in gold (coins and/or bullion)
Controls on external tradeImports of gold are subject to import licensing.
Controls on exports and imports of banknotes
On exports
Domestic currencyResidents traveling abroad may take with them up to LS 2,000 a trip unless they are traveling to Jordan or Lebanon. Travelers to Jordan and Lebanon who are not eligible for a foreign exchange allowance may take with them up to LS 7,500 a trip. Nonresidents leaving the Syrian Arab Republic are allowed to reconvert Syrian currency up to the equivalent of LS 25,000 into foreign exchange, provided that the banknotes are less than the amounts initially exchanged through the authorized banks during a period not exceeding two months before the date of departure.
Foreign currencyResidents traveling abroad may take with them foreign exchange up to the equivalent of $3,000 a trip to all countries except Jordan and Lebanon.
Resident Accounts
Foreign exchange accounts permittedResidents may open foreign exchange accounts in authorized banks with funds originating from abroad. Deposits may be transferred to other resident accounts. Deposits in the form of banknotes may be withdrawn only in that form, unless transferred abroad for medical treatment, education, newspaper subscriptions, or other similar noncommercial purposes. Deposits with a term of 15 days or more accrue a competitive rate of interest.
Held domesticallyYes.
Held abroadYes.
Approval requiredApproval is granted if the resident has economic activities abroad.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyNo.
Nonresident Accounts
Foreign exchange accounts permittedNonresidents may open accounts in convertible foreign currencies in authorized banks for the deposit of funds from abroad. Balances in such accounts may be sold to local banks, transferred abroad without restriction, or used to pay for authorized imports. Temporary nonresident accounts may be opened in the name of nonresidents temporarily residing in the Syrian Arab Republic.
Domestic currency accountsThese accounts may be credited with the proceeds in foreign currencies sold to the authorized banks and with other receipts in foreign currencies or in Syrian pounds; they may be debited to pay for expenses in the Syrian Arab Republic.
Blocked accountsYes.
Imports and Import Payments
Foreign exchange budgetThe foreign exchange requirements of the state trading agencies are met from the annual foreign exchange budget; these agencies automatically receive import licenses upon submission of documentation of their import requirements.
Financing requirements for importsWhen foreign exchange is not made available, private imports must be financed with the importers’ own resources through external credit arrangements, foreign currency deposits maintained in the Syrian Arab Republic by nonresidents, or foreign exchange purchased from other private or mixed enterprises through the intermediation of the ComBS at the free market rate. Imports of many goods are restricted to specific methods of financing.
Advance import depositsA non–interest bearing advance deposit is required for public sector imports in an amount equal to 100% of the value of the imports. Private sector imports are not subject to this requirement if they are financed from abroad. If authorized banks require an LC, an import deposit is required in the amount of 100% (10% in the case of manufacturers importing raw materials) of the value of the import plus a 3% fee.
Documentation requirements for release of foreign exchange for imports
Letters of creditPrivate importers may choose to import products specified on the permitted list by opening LCs at authorized banks.
Import licenses and other nontariff measuresAll imports valued at more than the equivalent of LS 2,000 (LS 1,000 for imports from Lebanon) require licenses, which are provided on proof of foreign exchange availability. A fee ranging from LS 104 to LS 454 is charged on issuance of an import license.
Positive listImports are regulated through three lists: (1) the “restricted list” for products whose imports are a monopoly of the public sector; (2) the “negative list,” comprising imports that are prohibited for security, health, or religious reasons or prohibited for the protection of domestic industries; and (3) the “permitted list,” with goods whose import by the private sector is permitted, subject to the restrictions on their financing. Imports must come directly from the country of origin, but the MOET has the authority to permit certain goods to be imported from countries other than the country of origin.
Negative listThere is a general list of goods that may not be imported from non-Arab countries. A separate list of prohibited imports from member countries of the Arab Free Trade Area includes only goods prohibited for health, safety, religious, or environmental reasons.
Other nontariff measuresImports from the Syrian free zones are allowed for certain industrial goods and for goods imported directly from the country of origin. Imports of commodities originating in Israel are prohibited.
Import taxes and/or tariffsAn import surcharge of 2% is applied to all imports; government imports and imports of certain essential items are exempted. Effective January 1, 2005, imports for customs duty purposes are valued at LS 50 per $1 (LS 48.65 per $1 in 2004). Import tariffs range up to 200%. All previous special levies on imports have been replaced by a unified import surcharge scheme with rates ranging from 6% to 35%. Effective September 9, 2004, Syrian nationals working abroad were no longer allowed import duty exemptions on luxury items valued between the equivalent of $500 and $7,000.
State import monopolyMany basic commodities (e.g., paper, salt, tobacco, wheat, iron and steel, and certain agricultural machinery) are imported only by state trading agencies or, for their own account, by certain private sector importers.
Exports and Export Proceeds
Repatriation requirementsExporters are required to repatriate the value of exports in acceptable foreign currencies within one year from the shipping date.
Surrender requirementsYes.
Financing requirementsAuthorized banks may accept prepayments for exports of Syrian products.
Documentation requirements
Letters of creditYes.
Preshipment inspectionYes.
Export licensesExports of wheat, barley, cotton, cotton yarn, and their derivatives are made by the government organizations dealing in cereals and cotton. Petroleum product exports are handled by the state Petroleum Marketing Office. Exports of certain other commodities are also reserved for government agencies, state trading agencies, and specified companies.
Exports of a few goods to all countries, and all exports to Israel, are prohibited.
Without quotasYes.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersAll payments for public sector invisibles are effected at the exchange rate for the state and public sector, while most payments for private sector invisibles are effected at the free exchange rate.
Trade-related payments
Prior approvalYes.
Investment-related paymentsRemittances of profit and dividends must be authorized by the EO upon proof of payment of income tax. Profits from projects approved by the Higher Committee for Investment under the investment law may be repatriated.
Prior approvalYes.
Payments for travelResidents traveling abroad may take with them foreign exchange up to the equivalent of $3,000 and LS 2,000 a trip to all countries except Jordan and Lebanon. Travelers to Jordan and Lebanon who are not eligible for a foreign exchange allowance may take with them up to LS 7,500 a trip in Syrian banknotes. On departure, residents of Syrian nationality must pay an exit tax of LS 600 a person if traveling to Arab countries and LS 1,500 a person for other destinations. An airport stamp tax of LS 200 is added to this tax.
Quantitative limitsYes.
Personal payments
Prior approvalA maximum of the equivalent of $20,000 (at the free exchange rate) may be transferred abroad for medical treatment, with authorization from the Ministry of Health, or for studies abroad, with authorization from the Ministry of Higher Education.
Quantitative limitsYes.
Foreign workers’ wages
Prior approvalYes.
Quantitative limitsUp to 60% of salaries received by foreign technicians and experts employed in the Syrian Arab Republic and 50% of salaries of personnel of foreign diplomatic and international missions in the Syrian Arab Republic may be transferred. Foreign staff connected with foreign direct investments are allowed to transfer 100% of severance pay. Pension income may be transferred to Syrians living abroad in foreign currency converted at the free exchange rate.
Other payments
Prior approvalYes.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Surrender requirementsProceeds from a few transactions by the public sector are sold at the exchange rate for the state and public sector and those from transactions by the private sector are sold at the free exchange rate. Likewise, Syrian government employees who are working abroad are required to repatriate and convert a minimum of 25% of each year’s earnings at the free exchange rate. Effective September 9, 2004, the regulation concerning the taxes on the Syrian nationals working abroad was abolished. Previously, all Syrians working abroad were subject to an annual tax of the equivalent of $50–$700, depending on their profession.
Restrictions on use of fundsYes.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instrumentsExports of capital require the approval of the EO.
On capital market securitiesThere is no market in medium- and long-term government bonds in the Syrian Arab Republic. Bonds are issued on an as-needed basis to government-owned banks to supplement their capital base.
Shares or other securities of a participating nature
Purchase abroad by residentsYes.
On money market instrumentsThe only instruments available in the Syrian Arab Republic are investment bonds issued by the Popular Credit Bank (PCB) as agent of the government. The bonds, which carry an interest rate of 6.5% a year, have a 10-year maturity but have a short-term effective holding period, as they are redeemable after 3 to 6 months. They may be purchased only by nonbank Syrian residents and by the PCB.
Purchase abroad by residentsYes.
On collective investment securitiesThese instruments do not exist in the Syrian Arab Republic.
Purchase abroad by residentsYes.
Controls on derivatives and other instrumentsn.a.
Controls on credit operations
Commercial credits
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Financial credits
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Controls on direct investment
Outward direct investmentYes.
Inward direct investmentImmigrants and nationals of Arab states are provided special facilities including a sevenyear tax exemption from all taxes in the tourism and agricultural industries. Projects with minimum fixed assets of LS 10 million approved by the government benefit from a number of exemptions from exchange and trade regulations, including exemption from customs duties on imports of required machinery, equipment, and vehicles. Companies with at least 25% public participation are exempt from all taxes for seven years and private companies are exempt for five years; exemption periods may be extended by an additional two years if the company exports at least 50% of its output. Investors are permitted to hold foreign currency accounts to finance convertible currency requirements. These accounts comprise all capital and loans secured in foreign currency and 100% of proceeds from exports. All profits may be transferred freely. The Syrian Arab Republic has investment guarantee agreements with France, Germany, Switzerland, and the United States. Companies licensed under the investment law are allowed to exchange into local currency at the free exchange rate a part of their assets, duly deposited at Syrian banks, to cover basic needs and local liabilities.
Controls on liquidation of direct investmentInvestors are free to repatriate foreign exchange capital after five years from the date of investment. Capital may be repatriated after six months if the project suffers from events beyond the control of the investor.
Controls on real estate transactions
Purchase abroad by residentsYes.
Purchase locally by nonresidentsNonresidents and foreign nationals may acquire real estate only after presenting evidence that they have converted into Syrian pounds the foreign exchange equivalent of the price of the property at the authorized local bank.
Sale locally by nonresidentsProceeds are required to be held in a blocked account and repatriated gradually.
Controls on personal capital transactionsn.a.
Provisions specific to commercial banks and other credit institutions
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsForeign currency deposits are not subject to reserve requirements.
Liquid asset requirementsYes.
Interest rate controlsYes.
Credit controlsYes.
Investment regulationsForeign banks are allowed to operate in free economic zones. Branches of foreign banks in free zones must have a minimum capitalization of the equivalent of $10 million in foreign exchange and their services may be available only to companies set up in the free zone.
Banks operating outside the free economic zones must have 51% ownership by local investors and be capitalized at a minimum amount of LS 1.5 billion.
In banks by nonresidentsYes.
Provisions specific to institutional investorsn.a.
Other controls imposed by securities lawsn.a.
Changes During 2004
Exchange arrangementJanuary 3. The budget accounting rate and the rate in neighboring countries (the commercial rate) were unified into the “exchange rate for the state and the public sector,” at the rate of LS 48.50/48.65 per $1.
January 7. Private banks were authorized to apply the “free exchange rate for private transactions” for specified transactions.
Imports and import paymentsSeptember 9. Import duty exemptions on luxury items valued between $500 and $7,000 for Syrian nationals working abroad were abolished
Proceeds from invisible transactions and current transfersSeptember 9. Taxation of Syrian nationals working abroad was abolished.
Changes During 2005
Exchange arrangementJanuary 1. The exchange rate for the state and public sector was devalued to LS 50 per $1 from LS 48.50/48.65 per $1.
Imports and import paymentsJanuary 1. For customs duty purposes, imports were valued at LS 50 per $1 (LS 48.65 per $1 in 2004).

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