The 2006 and 2007 International Monetary Fund (IMF) Article IV Consultations state that Syria's collection and dissemination of Government Finance Statistics (GFS) is undermined by considerable deficiencies regarding definitions, coverage, classification, methodology, accuracy, reliability, and timeliness that create large inconsistencies with monetary and balance of payments statistics. These chronic deficiencies in the collection and supply of fiscal statistics (i.e. cumbersome institutional arrangements, inadequate resource availability and unresolved methodological problems) make the accurate assessment of overall fiscal developments in Syria and the timely availability of such information to the public difficult. For example, budget data are only available with very long lags (i.e. two years for final budget accounts). Consequently, the IMF recommends that Syria significantly improve the quality and timeliness of fiscal statistics, particularly data on financing and balance of payments (BOP) statistics. In an attempt to address this problem, Syria began participating formally in the IMF's General Data Dissemination System (GDDS) on December 12, 2007, making a major step forward in providing the framework for the development of the statistical system. According to the United Nations Development Program's Program on Governance in the Arab Region (POGAR) 2006 financial transparency report, Syria's draft budget is to be submitted two months before the beginning of the fiscal year to the People's Assembly (Majlis al-shaab), which subsequently votes on it by section. Article 80 of the Consitutiton of Syria stipulates that after the budget's approval, the Assembly votes on new expenditures and revenues. Overall, however, the information does not address Syria's compliance with the IMF's Code of Good Practices on Fiscal Transparency.

General Overview

The roles and responsibilities of the Ministry of Finance (MoF) regarding fiscal policy are listed and defined on the MoF website. The 2006 and 2007 International Monetary Fund (IMF) Article IV Consultations note that, while the size and quality of the fiscal adjustment achieved in the past three years has led to an encouraging short-term outlook, the difficulties posed by the further depletion of Syria's oil reserves and the decline in oil revenue are challenging over the medium term. Therefore, the IMF recommends that Syria continue solidifying growth "by persevering with quality fiscal adjustment," (p. 2) which, "so far had been facilitated by the flexibility of capital outlays" (p. 17). However, the IMF Consultations concluded that a strong further fiscal effort was needed to address the secular decline in oil revenues and preserve fiscal and external sustainability. To accomplish this, the IMF recommended that Syria promptly phase in the petroleum price subsidy (PPS) reform and launch the VAT.

According to the United Nations Development Program's (UNDP) Program on Governance in the Arab Region (POGAR) 2006 financial transparency report, Syria's draft budget is to be submitted two months before the beginning of the fiscal year to the People's Assembly (Majlis al-shaab), which subsequently votes on it by section. Article 80 of the Consitutiton of Syria stipulates that after the budget's approval, the Assembly votes on new expenditures and revenues. Furthermore, Article 19 states that taxes "are imposed on an equitable and progressive basis which achieves the principles of equality and social justice" (POGAR 2006). The 2007 IMF Article IV Consultations notes that, as of the Consultations' release in August 2007, a draft public debt management law had been sent to the Cabinet and was expected to be approved soon thereafter. However, as of the preparation of this report in August 2008, it is unclear whether this law was ultimately passed. Nevertheless, in October 2006, the Syrian parliament approved a new Basic Finance Law, thus replacing the original 1967 law. The new Basic Finance Law, which is expected to take effect with the 2008 budget, improves upon the old version in several ways. For example, "it revamps public finance management rules and unifies the budget by bringing the investment budget under the purview of the Ministry of Finance" (p. 26).

The 2006 and 2007 IMF Article IV Consultations state that Syria's Government Finance Statistics (GFS) "suffer from major deficiencies with respect to definitions, coverage, classification, methodology, accuracy, reliability, and timeliness that generate severe inconsistencies with monetary and balance of payments statistics" (p. 8). These chronic deficiencies in the collection and supply of fiscal statistics (i.e. cumbersome institutional arrangements, inadequate resource availability and unresolved methodological problems) make the accurate assessment of overall fiscal developments in Syria and the timely availability of such information to the public difficult. For example, budget data are available with very long lags (i.e. two years for final budget accounts). Furthermore, according to the Consultations, financing data are simply not available and there is no dissemination of GFS data, which leads to discrepancies in external financing as reported in the budget and the balance of payment, the largest of which are between the financing requirements of the budget (reported by the MOF) and government financing (reported by the CBS). Finally, the methodology used for the compilation of fiscal data does not comply with either Government Finance Statistics Methodology (GFSM) 2001 or GFSM 1986.

To address the deficiencies in Syria's fiscal policy statistics collection and dissemination system, the IMF (during a June 2004 mission to Syria) extended considerable technical assistance to Syrian authorities, such as conducting a seminar to bring MoF officials up to date with various important aspects of the GFSM 2001 methodology. Furthermore, the IMF mission helped draft a detailed work plan designed to provide sufficient resources and training to the Directorate of Planning and Statistics (DPS) to enable it to better perform its tasks. Specifically, the work plan enables the DPS to better collect core source data, which is required for the compilation of annual GFS data in compliance with GFSM 2001 and to resume data reporting for publication in GFSY and IFS. The plan also enables the DPS to adequately report data to the IMF's Middle East and Central Asia Department (MCD).

The Principles

Clarity of roles and responsibilities.

II

The roles and responsibilities of the Ministry of Finance (MoF) regarding fiscal policy are listed and defined on the MoF website. However, this declaration does not specifically address Syria's compliance level with this principle. Overall, according to the 2007 IMF Article IV Consultations, fiscal policy in Syria "aims to reduce the overall budget deficit to 5 percent of GDP in 2007 (from 5.7 percent in 2006), notwithstanding an expected further decline in oil revenues of about 3/4 percentage points of GDP" (p. 2).

The IMF Consultations note that, while the size and quality of the fiscal adjustment achieved in the past three years has led to an encouraging short-term outlook, the difficulties posed by the further depletion of Syria's oil reserves and the decline in oil revenue are challenging over the medium term. Therefore, the IMF recommends that Syria continue solidifying growth "by persevering with quality fiscal adjustment," (p. 2) which, "so far had been facilitated by the flexibility of capital outlays" (p. 17). However, the IMF Consultations concluded that a strong further fiscal effort was needed to address the secular decline in oil revenues and preserve fiscal and external sustainability. To accomplish this, the IMF recommended that Syria promptly phase in the petroleum price subsidy (PPS) reform and launch the VAT. The IMF also commended Syrian authorities for the "sustained, timely and significant fiscal adjustment and welcomed the lowering of corporate income taxes," (p. 2) adding that the introduction in Syria of the VAT and the phasing out of petroleum price subsidies would provide the main pillars of the required fiscal adjustment.

In its 2006 Article IV Consultations, the IMF cautions Syria to be particularly vigilant about conducting further fiscal consolidation "within a transparent policy framework aiming at a steady improvement in the non-oil budget balance," adding that accelerating structural reforms to enhance the incentives for the private sector to invest and the capability of the financial sector to intermediate will be critical to creating new sources of growth and income to replace the waning oil wealth" (p. 19).

The 2005 and 2006 Article IV Consultations note that policy coordination in Syria is complicated by the fact that the Commercial Bank of Syria (CBoS) acts as the fiscal agent of the government. However, the Consultations concluded that Syrian authorities plan to reorient the activities of the CBoS towards commercial banking, thus making the Central Bank of Syria (CBS) act as the fiscal agent. As a result, the IMF observes that Syrian authorities plan to move the bulk of foreign assets of the CBoS to the CBS.

Open budget processes

II

According to the United Nations Development Program's (UNDP) Program on Governance in the Arab Region (POGAR) 2006 financial transparency report, Syria's draft budget is to be submitted two months before the beginning of the fiscal year to the People's Assembly (Majlis al-shaab), which subsequently votes on it by section. Article 80 of the Consitutiton of Syria stipulates that after the budget's approval, the Assembly votes on new expenditures and revenues. Furthermore, Article 19 states that taxes "are imposed on an equitable and progressive basis which achieves the principles of equality and social justice" (POGAR 2006).

The POGAR report observes that Syria still relies on oil revenues for almost half of the government's revenues, even though efforts are underway to expand the tax base, since oil production is diminishing. For example, according to the POGAR, Decree 61 of October 2004 simplified the tax system by repealing various fees and introducing a single ad valorem consumption tax, and Decree 41 of May 2005 extended its scope.

The 2007 IMF Article IV Consultations notes that, as of the Consultations' release in August 2007, a draft public debt management law had been sent to the Cabinet and is expected to be approved soon. However, as of the preparation of this report in August 2008, it is unclear whether this law was ultimately passed. Nevertheless, in October, 2006, the Syrian parliament approved a new Basic Finance Law, thus replacing the original 1967 law. The new Basic Finance Law, which is expected to take effect with the 2008 budget, improves upon the old version in several ways. For example, "it revamps public finance management rules and unifies the budget by bringing the investment budget under the purview of the Ministry of Finance" (p. 26). In addition, the new law creates new rules mandating an arms' length relationship between the Syrian government and Public Enterprises (PEs), permitting them to withhold their after-tax profits and to determine the nature of their investment activities, so long as they can secure financing from the markets. This is crucial as PEs play an important role in the economy, in particular in the energy and utilities' sectors, and in financial services.

Public availability of information.

NC

The 2006 and 2007 IMF Article IV Consultations state that Syria's Government Finance Statistics (GFS) "suffer from major deficiencies with respect to definitions, coverage, classification, methodology, accuracy, reliability, and timeliness that generate severe inconsistencies with monetary and balance of payments statistics" (p. 8). These chronic deficiencies in the collection and supply of fiscal statistics (i.e. cumbersome institutional arrangements, inadequate resource availability and unresolved methodological problems) make the accurate assessment of overall fiscal developments in Syria and the timely availability of such information to the public difficult. For example, budget data are available with very long lags (i.e. two years for final budget accounts). Furthermore, according to the Consultations, financing data are simply not available and there is no dissemination of GFS data, which leads to discrepancies in external financing as reported in the budget and the balance of payment, the largest of which are between the financing requirements of the budget (reported by the MOF) and government financing (reported by the CBS). Finally, the methodology used for the compilation of fiscal data does not comply with either GFSM 2001 or GFSM 1986.

The IMF notes that significant weaknesses in data hinder the effective monitoring of the Syrian economy's response to ongoing reforms and could lead to policy mistakes, adding that "utmost priority should be given to mobilizing the needed expertise to upgrade the statistical system, particularly in the areas of the BOP and the national accounts and price statistics." (p. 25). According to the IMF Consultations, the development of short-term indicators of fiscal activity to monitor the state of the economy on a timely basis is particularly important given the acceleration of structural reforms in Syria, a challenge that is further complicated by the flows of people, goods and money from and into neighboring Iraq.

To address the deficiencies in Syria's fiscal policy statistics collection and dissemination system, the IMF (during a June 2004 mission to Syria) extended considerable technical assistance to Syrian authorities, such as conducting a seminar to bring MoF officials up to date with various importance aspects of the GFSM 2001 methodology. Furthermore, the IMF mission helped draft a detailed work plan designed to provide sufficient resources and training to the Directorate of Planning and Statistics (DPS) to enable it better perform its tasks. Specifically, the work plan enables the DPS to better collect core source data, which is required for the compilation of annual GFS data in compliance with GFSM 2001 and to resume data reporting for publication in GFSY and IFS. The plan also enables the DPS to report to adequately report data to the IMF's Middle East and Central Asia Department (MCD). Finally, the IMF mission "recommended improvement in the timeliness of annual data, including data on financing, and a start on the compilation of sub-annual data" (p. 8).

According to the CBS website, Syria began participating formally in the IMF's General Data Dissemination System (GDDS) on December 12, 2007 making a major step forward in providing the framework for the development of its statistical system. It is expected that Syria's participation in the GDDS will markedly improve the collection and reporting of monetary statistics in Syria. Syria is still not a subscriber to the Special Data Dissemination Standard (SDDS) (IMF SDDS website).

Independent assurances of integrity.

II

There is no publicly available information as to Syria's compliance with this principle.