Syria Revises Import and Export Regulations
The Central Bank of Syria recently issued two key decisions that have a bearing on import and export regulations. According to Resolution 1070/2021, importers must resort to financing via their bank accounts, whether in Syria or abroad, or through Syrian banks licensed to deal in foreign exchange, or from a licensed foreign exchange bureau, and provide proof of the transactions. Such conditions precede the issuance of import licenses ultimately by the Ministry of Economy and Foreign Trade and are valid until at least the end of February 2022. A further stipulation has also been included that requires importers to firstly obtain written confirmation from the Central Bank that their source of funding is approved prior to their imports arriving in Syria.
With respect to exporters, the Central Bank also issued Resolution 1071/2021. It originally obliged exporters to sell 50% of their foreign exchange proceeds earned from exports to the Central Bank at the official exchange rate of SYP 2,500 per US Dollar. The Federation of Syrian Chambers of Industry subsequently reached an agreement with the Central Bank for the latter to purchase 50% of the foreign exchange proceeds at the parallel market rate plus SYP 20. Therefore, if the parallel rate is SYP 3,390 per US Dollar, the purchase price will be SYP 3,410. The Customs Directorate will not process any export applications unless the exporter commits to this pledge.
The Central Bank confirmed it is prepared to purchase foreign exchange from exporters outside Syria where they are unable or unwilling to transfer the amounts due to restrictions arising from international sanctions imposed against Syria. Furthermore, the Central Bank is offering to purchase all export earnings at the premium rate, not just 50% from exporters. Exporters can alternatively sell their foreign exchange to importers provided that their contracts are executed through a licensed foreign exchange bureau acting as an intermediary to prevent black market dealings. Moreover, they can transact directly with foreign exchange bureaus.
Such export measures were first introduced in 1988 following an economic crisis in Syria, and were reapplied during the war but halted in mid-2016. In 2019, stakeholders insisted that a preferential foreign exchange rate must be applied under such circumstances, or otherwise production costs would rise. Given that transfers of export earnings to Syria are difficult, exporters were concerned that they would have to purchase fresh foreign exchange at an unofficial rate to sell to the Central Bank at a loss, which would restrict their capacity to import raw materials and also drive up the unofficial rate.
Despite such complaints by exporters, some faced criticism for being content to purchase foreign exchange at the official Central Bank rate to finance the import of essential raw materials but would likely refuse to sell their export earnings at the same rate. While import controls have been implemented to stimulate local industries and help arrest the depreciation of the value of the Syrian Pound, the Central Bank has followed a practice of facilitating the provision of finance to traders who import basic and essential goods, and raw materials at the official rate of SYP 2,500 per US Dollar. Other importers have to resort to purchasing foreign exchange at an unofficial, or parallel rate, of approximately SYP 3,440 per US Dollar due to a scarcity of hard currencies in the markets.
The measures adopted by the Central Bank seek to formalize foreign exchange transactions by evidencing in a written record sales and purchases of hard currencies. In doing so, they aim to contribute to the overall policy of safeguarding the value of the Syrian Pound from further declines. It is noteworthy that on the eve of the conflict back in March 2011, the local currency stood at SYP 47 to the US Dollar. The war, international sanctions, the Lebanese financial crisis, and capital flight are all contributory factors to the reasoning behind the issuance of these two Central Bank resolutions.