Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

SYRIAN ARAB REPUBLIC

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of January 31, 2007)

Status under IMF Articles of Agreement
Article XIVYes.
Exchange Measures
Restrictions and/or multiple currency practicesThe staff report for the 2006 Article IV consultation with the Syrian Arab Republic states that as of July 14, 2006, Syria maintained under Article XIV restrictions on payments and transfers for current international transactions, including administrative allocation of foreign exchange. Syria also maintains exchange measures that are subject to Fund approval under Article VIII: (i) a prohibition against purchases by private parties of foreign exchange from the banking system for some current international transactions; (ii) a multiple currency practice resulting from divergences of more than 2% between the official exchange rate and officially recognized exchange rates; (iii) a non-interest-bearing advance import deposit requirement of 75% to 100% for public sector imports as well as private sector imports which are not financed from abroad; and (iv) an exchange restriction arising from the net debt under inoperative bilateral payments arrangements with the Islamic Republic of Iran and Sri Lanka. (Country Report No. 06/294)
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)n.a.
Other security restrictionsn.a.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of the Syrian Arab Republic is the Syrian pound.
Exchange rate structure
DualEffective January 1, 2007, the exchange rate system consists of two rates: first, the legally designated official rate of LS 11.20/11.25 per $1, which applies to the repayment of loans and interest arising from bilateral payments agreements, pending agreements on their rescheduling; and second, the exchange rate for all other transactions, which unified the other exchange rates. As a result, the exchange rate structure has been reclassified to the category dual from the category multiple. Previously, the state and public sector “budget rate” of LS 50 per $1 constituted the second rate. This rate applied to (1) payments for public sector exports, including the export of crude oil and petroleum; (2) all public sector imports; (3) repayment of loans not related to bilateral payments agreements; (4) public sector remittances from abroad; and (5) all other public sector enterprise foreign exchange transactions. Third, the free market foreign exchange rate was set to reflect developments in the free market exchange rates offshore in Beirut and Amman and applied to foreign exchange sales by authorized banks for (1) private sector purchases of foreign exchange for noncommercial transactions, including medical, study, religious, and travel expenses; (2) the extension of credit to importers of raw material needed for exports; (3) private sector exports; and (4) private sector remittances and receipts from the export of services. Fourth, the unofficial rate was the free market rate, which was the rate in certain cities in the region (mainly Amman and Beirut) and in Syria that applied to (1) private sector import payments not financed by banks, (2) private sector remittances and services receipts and payments, and (3) private capital flows. The free market rate was determined by private supply and demand, with market participants matching their needs through brokers or dealers in the offshore market.
Classification
Conventional pegged arrangementThe official rate is pegged to the dollar.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
References to legal instruments and hyperlinksn.a.
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 second-class international hotel bills in foreign exchange.
Controls on the use of domestic currency
For current transactions and paymentsNonresidents are generally required to settle their airfares in convertible currency.
Use of foreign exchange among residentsThis is permitted through authorized banks.
Payments arrangements
Bilateral payments arrangements
InoperativeThere are agreements with the Islamic Republic of Iran.
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.
Payments arrears
OfficialYes.
Controls on trade in gold (coins and/or bullion)
On domestic ownership and/or tradeControls apply on gold coin and bullion transactions.
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 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 purchase from banks and take with them foreign exchange up to the equivalent of $3,000 a trip to all countries except Jordan and Lebanon, where the maximum amount is $1,000, to be sold to travelers by banks at the borders. Nonresidents may take abroad any amount of foreign exchange if they declared it when they entered the country; if they do not have a declaration, they are allowed to take $5,000.
References to legal instruments and hyperlinksn.a.
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 or for deposit abroad without limitation. Deposits in the form of banknotes may be withdrawn only in that form, unless transferred abroad for medical treatment, education, newspaper subscriptions, other similar noncommercial purposes, or imports. Deposits with a term of 15 days or more accrue a competitive rate of interest. Residents are allowed to buy foreign exchange up to the equivalent of $5,000 and deposit it at authorized domestic banks for at least six months.
Held domesticallyYes.
Held abroadYes.
Approval requiredApproval is granted if the resident is engaged in economic activities abroad.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyNo.
References to legal instruments and hyperlinksn.a.
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 of foreign currencies sold to 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. Neither the account balances nor the interest accrued on these accounts is transferable.
Convertible into foreign currencyNo.
Blocked accountsProceeds from the sale of real estate in the Syrian Arab Republic by nonresidents must be deposited in blocked domestic currency accounts. LS 180,000 or its equivalent may be transferred abroad from such accounts. The account may be debited for expenses in the Syrian Arab Republic.
References to legal instruments and hyperlinksn.a.
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 on submission of documentation of their import requirements.
Financing requirements for importsEffective November 15, 2006, banks are allowed to finance all types of imports, except those on the negative list. Previously, foreign exchange was available for a portion (about 60%) of the private sector imports. All other private imports had to be financed with the importers’ own resources through external credit arrangements, foreign currency deposits maintained in the Syrian Arab Republic by residents, or foreign exchange purchased from other private or mixed enterprises through the intermediation of authorized banks at the free market rate.
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 by banks, based on the solvency of the client (the importer).
Documentation requirements for release of foreign exchange for imports
Domiciliation requirementn.a.
Letters of creditPrivate importers may choose to import products specified on the permitted list by opening LCs at authorized banks.
Import licenses used as exchange licensesYes.
Othern.a.
Import licenses and other nontariff measuresSome imports require licenses.
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,” of 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.
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 exempt. Imports for customs duty purposes are valued at the quarterly exchange rate published by the Central Bank of Syria and calculated based on the average exchange rate between the Syrian pound and the dollar of the previous month. Import tariffs range up to 135%. All previous special levies on imports have been replaced by a unified import surcharge scheme with rates ranging from 6% to 35%.
Taxes collected through the exchange systemn.a.
State import monopolyMany basic commodities (e.g., paper, salt, tobacco, wheat, and certain agricultural machinery) are imported only by state trading agencies or, for their own account, by certain private sector importers.
References to legal instruments and hyperlinksn.a.
Exports and Export Proceeds
Repatriation requirementsEffective February 28, 2006, exporters are required to repatriate the value of exports in acceptable foreign currencies within seven months (previously, one year) from the shipping date. Residents who are not solvent are required to deposit 10% of the value of exports as a guarantee for the repatriation of the proceeds.
Surrender requirementsExport earnings must be sold to authorized commercial banks unless they are (1) kept in a foreign exchange account for financing imports of the exporter or (2) sold to importers.
Surrender to authorized dealersYes.
Financing requirementsAuthorized banks may accept prepayments for exports of Syrian products.
Documentation requirements
Letters of creditYes.
GuaranteesYes.
DomiciliationYes.
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.
References to legal instruments and hyperlinksn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersAll payments for public sector invisibles are effected at the official foreign exchange rate, and most payments for private sector invisibles are effected at the free foreign exchange rate.
Trade-related payments
Prior approvalYes.
Investment-related paymentsProfits and dividends from projects approved by the Higher Committee for Investment under the investment law may not be transferred until five years from the date of investment unless financed from export proceeds and with the authorization of the EO on proof of payment of income tax. Effective January 27, 2007, the new Law No. 8 allows the free transfer of all profits and dividends.
Prior approvalYes.
Payments for travelResidents traveling abroad may buy $3,000 each time they travel abroad on presentation of their passport, visa, and airline ticket. The foreign currency amount is registered in the passport to avoid circumvention. Travelers to Lebanon and Jordan may buy $1,000 at the border each time they cross the border. On departure, residents of Syrian nationality must pay an exit tax of LS 800 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 $30,000, at the free market foreign exchange rate, may be transferred abroad for medical treatment, with authorization from the Ministry of Health. For studies abroad, the amount of foreign exchange that may be purchased is set by and is subject to the authorization of 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 diplomatic missions in the Syrian Arab Republic may be transferred. Foreign staff connected with foreign direct investment are allowed to transfer 100% of severance pay. Pension income may be transferred to Syrians living abroad, in foreign currency converted at the official foreign exchange rate.
Indicative limits/bona fide testn.a.
Other payments
Prior approvalYes.
Quantitative limitsn.a.
Indicative limits/bona fide testn.a.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Restrictions on use of fundsYes.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsn.a.
Surrender requirementsn.a.
Controls on capital and money market instrumentsExports of capital require the approval of the EO.
On capital market securities
Shares or other securities of a articipating nature
Sale or issue locally by nonresidentsProceeds from the sale of domestic shares may be transferred only with the permission of the EO.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsn.a.
Bonds or other debt securitiesNo treasury bonds or bills are issued in the Syrian Arab Republic.
On money market instrumentsThere are two instruments available in the Syrian Arab Republic. The first is an investment certificate issued by the Popular Credit Bank as an agent of the government. The certificates, which carry an interest rate of 7.5% a year, have a 10-year maturity, but have a short-term effective holding period. The second are certificates of deposit (CDs) issued by authorized banks. CDs have many maturity dates (one, two, and three years) and carry many interest rates, according to their maturity (9%, 9.5%, and 10%, respectively).
Purchase locally by nonresidentsn.a.
Sale or issue locally by nonresidentsn.a.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsn.a.
On collective investment securitiesn.r.
Controls on derivatives and other instruments
Purchase locally by nonresidentsThese transactions are not allowed.
Sale or issue locally by nonresidentsn.a.
Purchase abroad by residentsn.a.
Sale or issue abroad by residentsn.a.
Controls on credit operations
Commercial credits
By residents to nonresidentsResidents are required to repatriate their export earnings within seven months from the date of delivery.
To residents from nonresidentsYes.
Financial credits
By residents to nonresidentsResidents may lend to nonresidents only with the permission of the EO.
To residents from nonresidentsResidents may borrow from nonresidents only with the permission of the EO.
Guarantees, sureties, and financial backup facilitiesControls apply to all these transactions.
Controls on direct investment
Outward direct investmentResidents may invest abroad only with the permission of the EO.
Inward direct investmentInward direct investment is subject to licensing according to the Law on Investments. 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 official foreign exchange rate a part of their assets, duly deposited at Syrian banks, to cover basic needs and local liabilities.
Controls on liquidation of direct investmentEffective January 27, 2007, the new Law No. 8 allows an investor to transfer foreign exchange capital after payment of taxes without time limitations (previously, five years had to elapse).
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 an 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.
References to legal instruments and hyperlinksn.a.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Borrowing abroadBanks may borrow abroad with the permission of the EO.
Maintenance of accounts abroadBanks may have correspondent accounts abroad.
Lending to nonresidents (financial or commercial credits)Lending to nonresidents is generally subject to licensing by the EO.
Lending locally in foreign exchangeBanks are allowed to finance private sector imports in the form of (1) six months’ deferred payment for any licensed imports or (2) a one-year foreign currency loan for imports used for export production or reexport.
Purchase of locally issued securities denominated in foreign exchangen.a.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsForeign currency deposits are subject to reserve requirements.
Liquid asset requirementsYes.
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 are available only to companies set up in the free zones.



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.
Abroad by banksThe general rules for investments abroad apply.
In banks by nonresidentsYes.
Open foreign exchange position limits
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investorsn.a.
References to legal instruments and hyperlinksn.a.
Changes during 2006
Imports and import paymentsNovember 15. Banks were allowed to finance all types of imports, except those on the negative list.
Exports and export proceedsFebruary 28. Exporters were required to repatriate the value of exports in acceptable foreign currencies within seven months (previously, one year) from the shipping date.
Changes during 2007
Exchange arrangementJanuary 1. The public sector and the free market rates were unified, and thus the exchange rate structure was reclassified to the category dual from the category multiple.
Payments for invisible transactions and current transfersJanuary 27. The new Law No. 8 allows the free transfer of all profits and dividends.
Capital transactions
Controls on liquidation of direct investmentJanuary 27. The new Law No. 8 allows an investor to transfer foreign exchange capital after payment of taxes without time limitations (previously, five years had to elapse).

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