Treasury Bills Ready to Launch in New Year – Economist

The Syrian government’s decision to launch treasury bills will be welcomed warmly by the country’s private-sector banks
1 November 2007, 
Economist Intelligence Unit  Economist Intelligence Unit 

The government has finally passed decrees on two important policy innovations—on the exchange rate peg and the introduction of treasury bills—which were first flagged up by Adib Mayaleh, the governor of the Central Bank of Syria, in late 2006. The measures indicate that Syria’s financial and economic reform process has maintained some of its momentum, despite the Assad regime’s increasing political isolation. However, there have been setbacks in the area of fiscal reform, with plans for introducing valued-added tax back by one year to 2009 and with doubts surfacing over whether a programme to phase out fuel price subsidies will be put into effect.

Following the passage in mid-August of a decree approving the shift of the reference point for the exchange rate from the US dollar, the central bank in early October included a note on its website to the effect that the dollar peg has now definitively been abandoned in favour of the SDR, which is weighted 44% to US dollar, 34% to the euro and 11% each to the yen and sterling. In the three months leading up to the formal announcement of the new peg, the local currency appreciated by about 3% against the dollar, with the rate announced by the central bank moving from S£50.45:US$1 at the end of June to S£48.80:US$1 in mid-October. There has also been a modest depreciation against the euro over the same period to S£69.4:€1 in mid-October from S£68.33:€1 at end-June.

Debt management

The decree on treasury bills offers the prospect of a significant change in both the government’s management of public debt and in the operations of Syrian banks. The decree (No. 60) sets out the principles and regulatory framework for issuing treasury bills, with further details to be provided in the form of executive regulations to be announced by the prime minister at a later date based on the recommendations of a government securities management committee.

This committee is to be chaired by the finance minister. Its six other members will include the central bank governor and the chairman of the Syrian Commission on Financial Markets and Securities (the regulatory agency for the stockmarket, which is scheduled to start operations in early 2008).

The decree states that the maturity of the treasury securities must be at least one year, and that they may not exceed 30 years. The proceeds of the issues may be used to finance the general budget deficit, as well as for projects of national priority and for emergencies. The decree also sets limits of 60% of GDP for domestic and external debt, respectively, and of 80% for overall public debt. According to the IMF, Syria’s total government debt was equivalent to 35.9% of GDP at end 2006, with domestic debt of 16.5% of GDP and external debt standing at 19.4%.

Besides allowing the authorities more flexibility in managing public debt, the introduction of T-bills will provide much-needed new instruments in which Syria’s newly created private banks will be able to invest. These banks have had great success in attracting deposits, but have faced difficulty in placing these funds productively. According to central bank figures reproduced by the IMF, private banks in 2006 captured 70% of the increase in private-sector deposits and contributed 45% of the growth in loans to the private sector. Their share in private-sector deposits reached 25% at the end of last year, whereas they accounted for 14% of total loans to that sector.

Listing rules

Decree 60 states that the T-bills will be tradable on the new financial securities market. The prospects for that market opening as planned early next year have brightened, with several recent indications of progress in laying the groundwork for this development. The stockmarket regulator has issued its first permanent licence to a financial intermediary—Pioneers Securities of Egypt (BME Oct 15th-31st 2007)—and the government has passed a decree laying out the steps for family-owned firms to convert themselves into joint-stock companies.

According to Al Thawra, a state-run newspaper, the regulator has also issued the criteria for listing companies on both the main stockmarket and on a junior exchange (the regulator has yet to publish these details on its own website). For a full listing, a company must have been trading for at least three years and have minimum capital of S£300m (US$6.1m), fully paid up, with at least 300 shareholders. It must also present three years of accounts audited to international standards, with no reservations, and its annual net profit over the previous two years must have averaged not less than 5% of paid-up capital. For the alternative market, a company must have been trading for at least two years, with capital of at least S£100m and at least 100 shareholders. Companies will also be required to submit prompt periodical reports about their activities. The rules will allow for non-Syrian companies to be listed as well as domestic firms.

Comments (17)

majedkhaldoun said:

this is good, may be we can invest in it,once we can trust the safety of our money, but first,they must annul the nationalization law that started with NASSER, and cancel agrarian reform,and cancel the unfair law that allow the farmer to take over the land if he plow it, even if it is not his.

October 26th, 2007, 9:50 pm


EHSANI2 said:


You make valid observations. Nasser’s days are hard to forget for the business community. The total repeal of these policies ought to be made into law.

In addition, the exact nature of the corporate tax rate needs to be clarified. Right now, most businesses get away without declaring the true tax liability. Once they decide to list and go public, this will no longer be the case.

As one of the leading business men in Damascus told me this summer:
“Why would we list and pay a minimum of 25% in taxes? What services are we going to get in return?”

Having said this, this new T.bill market will be very attractive for the banking sector. They can now participate in the “positive carry” trade where they take deposits at x% and lend them to the government at y% (y>x). Should the bills yield close to the loan rates, these banks may well decide to forgo lending and instead park their deposit liabilities into government bills. This will all depend on what the yield on these securities will be. I, for one, cannot wait to find out even though individuals cannot buy these T.bills directly.

October 26th, 2007, 10:57 pm


idaf said:

Israeli Minister: Israel is ready to return Golan for peace
Science, Culture and Sport Minister Raleb Majadele said Friday that Israel is ready to pay the price of peace with Syria, which he described as a withdrawal from the Golan Heights in exchange for peace with the entire Arab world.
“Israel will not be able to normalize relations with Arab nations without paying the price of anything related to the Palestinian issue,” he said.
He reiterated that he doesn’t rule out the possibility that “the fate of the settlements in the West Bank will be the fate of the settlements from the Gaza Strip,” referring to Israel’s 2005 withdrawal of settlements from the coastal territory.

Also don’t miss: Speakers in UN General Assembly Second Committee call on Israel to stop destroying infrastructure, causing environmental damage in occupied Arab lands

October 26th, 2007, 11:07 pm


idaf said:

Surprisingly today, the Israeli government started sending peaceful messages to Syria. First the IDF today announced that it will “cancels Golan Heights field exercise to allay Syrian fears” and then an Israeli minister announces that “Israel is ready to return Golan for peace“.

This can be read in one of 2 ways:
1- Either the Israeli government is really scared of a war breaking out (or have information/intelligence that the Syrians are seriously planning military retaliation).
2- Israel is preparing another act of aggression on Syria.

The last time such peaceful messages were sent through the Europeans (Solana) and by direct quotes from the Israeli defense minister, the next day Israel violated Syrian and Turkish airspace and dropped bombs in Syria.

October 26th, 2007, 11:32 pm


norman said:

Ehsani2 ,
What do you think will happen if there is no corporate tax in Syria but only individual income tax ,so if the owner is individual he will be paying the tax , if the company gives dividend there will be taxes on these dividends.
Do you a program like this will work in Syria and encourage investments.
Majed , I agree with you , Syria needs safety, property rights , rule of law and stable exchange rate. with these investments will flow in and increase employment.

October 27th, 2007, 12:13 am


trustquest said:

How much the return on the T bill should be to counter current inflation rate in Syrian current economic state. Can you make a guess?

October 27th, 2007, 12:41 am


ugarit said:

Norman Said: “What do you think will happen if there is no corporate tax in Syria but only individual income tax ”

I hope you’re not serious. That would be absurd. Corporations can be a huge drain on infrastructures and they need to pay up.

October 27th, 2007, 1:06 am


majedkhaldoun said:

Ehsani, you are the best and smartest,I respect your ideas very much, I do think that , this is the begining and it is a move in the right direction, I have question for you ,would this stabilize the value of Lira,compare to the euro for example,and as trustquest said it should counter inflation, as people invest in t bill and banks,would that have affect on real estate value?the only investment available in the past.

October 27th, 2007, 1:20 am


EHSANI2 said:

Dear Trustquest,

In principal, nominal interest rates ought to move in tandem with nominal economic growth. In other words, it usually equals the expected inflation rate plus real economic growth. It is impossible to know what the inflation rate is currently. My suspicion is that has been elevated due to higher commodity prices rather than loose monetary policy. During the summer, the private banks were lending at rates close to 10-11%. Given that holding government securities are less risky than lending, one would think that these T.bills will yield somewhere between the savings rate paid on deposits and those rates charged on loans. I would therefore “guess” that they will be around 7-8%. While some have complained about domestic inflation, the Syrian pound has lost little value over the years. The central bank’s control over this rate has been outstanding.
Since exporting has never been a priority, this has not caused a major problem. In Turkey, they had let their currency devalue by the same level of their inflation rate. This way, their exports stayed competitive. But, Syria is not in that mind set yet.
The Iraqi money inflows have caused a massive rise in money in circulation. It could well be that the Syrian central bank has not compensated against this by taking its own liquidity out. If this is true, one can conclude that the country’s inflation is indeed monetary in nature.

The Syrian government is likely to use these bills to finance infrastructure projects. In effect, depositors will be placing their money in the banks at x%. The banks will lend them to the government at y% (making a spread).


Individuals will set up companies and forgo filing as individuals in your scenario. Syrians are too adept at these games.

Dear Majed,

Thank you. I do agree that this is an excellent and long overdue step. Remember that this market is not open to individuals as far as I know. If the rate is attractive, it may indeed give people an incentive to invest in them rather than park money in real estate.
However, government bills are supposed to be a low yield and low risk asset class. I doubt that they will be able to suck enough money out of real estate. Again, my worry is for banks to stop the little lending that they do today and opt instead to buy these securities. This will end up crowding out the private sector funding in favor of the public sector and the government financing. It is just too early to know how it will all work out. The clear winners are the private banks in my opinion.

October 27th, 2007, 1:21 am


why-discuss said:


These sweet words may also reflect the desire to appear cooperative after having been scolded by Condi. This way, if Condi’s november conference fails, Israel would claim that they have shown flexibility while the arabs did not. This kind of unusually soft attitude may also indicate that Israel is betting on the failure or cancellation of the conference.

October 27th, 2007, 1:31 am


AnotherIsraeliGuy said:

Guys, what interest rate do you get now if you deposit Lira in a Syrian bank? What is the range?

It would be interesting once these T-bills are traded to look at the interest rate curve. Since the T-bills could be worthless if the regime collapses, it is possible that long term rates will be significantly higher than short term ones. Conversely, one could compute the probability that the market assigns to the regime staying in power from the interest curve.

October 27th, 2007, 1:37 am


EHSANI2 said:


The banks used to pay as high as 8 and 9%. These deposit rates have come down. Indeed, checking accounts now earn close to zero at the commercial bank. It will be interesting indeed to see how the yield curve will look. If the one year ends up yielding between 7-8% as I suspect, where would a 30-year security trade? It is extremely unlikely that such long tenors will trade for sometime. I think this market will stay in the one year sector for a while and then gradually move up to 3 and 5 year which will likely have a premium of 1-2% over the one year (9-10% yield). The Syrian Pound is very stable incidentally. Were there to be an immediate risk, you would have seen the black market adjust that value quickly. Thus far, there are absolutely no signs of that. It is not a free floating currency by any means. Still, the way it behaves is extremely stable at the present time.

October 27th, 2007, 1:47 am


AnotherIsraeliGuy said:


Have the rates come down because of collusion between the banks, or does this reflect some economic reality? Because you are describing a negative real interest rate assuming that inflation is several percentage points. No wonder nobody puts money in the bank.

October 27th, 2007, 1:53 am


EHSANI2 said:

Actually, lots of people do/did. The policy was insane. You earn 8-9% at the commercial bank of Syria (government owned). Why work? You could double your money every 10 years. The other reason people poured money in the banks is because they became exempt from estate tax. If you died, the government will not levy a death tax on them. This gave people a massive incentive to leave money in banks. With little Lending opportunities, the commercial bank of Syria stored the cash bills in storage to rot. They were paying interest and earning hardly much. The private banks pushed for a change when they started. The commercial bank also gave up the policy because it had way too much money than it knew what to do with them

October 27th, 2007, 2:00 am


majedkhaldoun said:

the price of oil $92, if Turkey invade Iraq, next few days( may be sunday)expect it to be higher than $100

October 27th, 2007, 3:29 am


why-discuss said:

With the dollar in continuous devaluation to around 50% versus the euro in just a few years, 100 $ is still a reasonable price.

October 27th, 2007, 5:01 am


ausamaa said:

October 26, 2007

Jeffrey Feltman Moves On

Does “Loving” Lebanon Mean Never Having to Say You’re Sorry?


As US Ambassador Jeffrey Feltman packs his bags and prepares to depart Lebanon for his next assignment, he probably should be forgiven for feeling a bit abused these past few months.

His pique surfaced on October 22 nd when he rudely insulted his host, his Christian eminence Bishop Mattar specifically, and Lebanese journalism in general when he likened it to a court clown tasked with bringing him some laughter in the morning which helps him forget his Lebanese concerns. Beirut’s media, including Al Safir has been having a field day commenting on the American Ambassador’s unprecedented pro Israel activities while claiming to “love Lebanon”.

Talal Salman, its editor in chief wrote on October 24:

If there had been a true state in Lebanon, the America ambassador in Beirut Jeffery Feltman would have been “deported” back to his country. . Never in the history of relations between countries has a foreign ambassador given himself such license to interfere, though public and secret personal communications, daily televised statements, and written journalistic columns of late, in the most critical of internal affairs of the state to which he was sent …

As for the (Hezbollah led) opposition, the ambassador is persistent in his attacks on it and on its political committees, prominent figures, and leaders as if he was a citizen of this country or one of its prominent figures in the legal, constitutional, and popular sense. The ambassador often goes beyond all borders as he does not settle for defending Israel against the accusations that it waged a destructive war on Lebanon for paltry excuses, he forges all the facts and insists on announcing that Hezbollah is responsible for all the material and humanitarian losses that Lebanon suffered while the whole world knows that Feltman’s administration back in Washington forced its eternal ally Ehud Olmert to escalate the situation from a routine border engagement to a war for which the Israelis were not prepared which in turn forced Olmert to work to cause the maximum suffering in Lebanon to make up for Israel’s loss of prestige following the defeat of its invincible army The most that the Lebanese can hope for now is that this ambassador can leave us alone before the fire, which he keeps fanning, spreads and burns, what is left of Lebanon.

Another columnist wrote: “we thank the American ambassador for spending his last days in Lebanon and we hope that he will be successful wherever he goes next and that what befell Lebanon during his tenure will not befall ambassador Feltman’s future destinations. ”

In fairness to the Ambassador, his assignment has not been easy. Being a US Ambassador these days in the Middle East involves more than ribbon cuttings, and rriday night Beer blasts with the marine embassy guards and keeping visiting and loquacious US officials under wraps.

Following a total of nearly seven years service in Israel, at both the US Embassy and the US Consulate, Foreign Service Officer Feltman was sworn in as US Ambassador to Lebanon on July 22, 2004, with the help of former US Ambassador to Israel Martin Indyk’s an ardent Zionist and current Washington DC based activist for AIPAC and an Arab/Muslim bashing mouthpiece for the Israel Lobby. Feltman acquired Indyk’s support to be Israel’s man in Lebanon during the year (2000-2001) they worked together in Israel. Feltman was Ambassador Indyk’s Special Assistant.

But, no sooner had Feltman arrived in Beirut than he was handed a thick file which included nearly a dozen unfinished projects. They were not just your everday, easy make work projects and he has failed at every one of them.

According to a Staffer at the Lebanon Desk at the State Department (202-644-4000) who was not authorized to speak publicly on this subject: “State expected Feltman to advance at least some of this shit!” indicating a list fairly well known to Foggy Bottom denizens. Some of the items:

— Formulate ways to weaken Hezbollah and the influence of the Lebanese Resistance in Lebanese politics and the Region

–Sharply reduce, with the eventual objective of elimination, Syrian and Iranian influence in Lebanese politics and help identify their ‘assets’.

–Conduct and coordinate with visiting US officials, on site visits and undertake discussions with Tripoli/Bignin/Akkar Sunni groups with respect to a possible joint US-Lebanese Airbase at Kleit

— Analyse the feasibility of a North Lebanon Sunni Army to check the Southern Shia military power

–Facilitate the establishment of a new Shia political party in the Tyre area in order to counter and weaken Amal and Hezbollah

— Analyze the prospects of a civil war in Lebanon involving March 14 Christians and Sunni Muslims against (Aounist) Christians and Shia Muslims

— Investigate and analyze the possibility of Lebanon being divided into Autonomous Regions a la Iraq .

— Advance the plans to build an enlarged and more secure US Embassy in Baabda

–Bolster the acceptance and popular standing in Lebanon of the Maronite Lebanese Forces and the Druze Socialist Party led by Samir Geagea and Walid Jumblatt respectively ( Meanwhile, Feltman’s bosses in Washington were telling Walid Jumblatt this week that he can count on US military help for the ‘ autonomous zone’ he dreams about to combat Hezbollah and the Lebanese Resistance)

— Continue analysis of the feasibility of a US-Lebanese Strategic Alliance with a possible NATO aspect

And the list goes on.

Feltman’s current schedule and recent burden has been to try to answer a host of questions which have arisen inside Lebanon and throughout the Middle East over the US Israel project for the region. One aspect is the above noted ‘strategic alliance’ complete with “forward power projecting military bases” widely believed to be planned for Lebanon. Last week Eric Edelman, US undersecretary of Defense for Strategic planning seemed to promote its importance when he met with a number of civilian and military officials during his visit here and sat for a television interview in which he uttered clear statements that clearly refuted what ambassador Feltman had denied publicly.

The “strategic alliance” project, is confirmed by more than one high-ranking American official in Washington and is being studied in the State Department, the Senate Armed Services Committee and Intelligence Committee Chaired by Bush Administration critic Patrick Leahy.

In his frustration, Feltman, according to Beirut’ As Safir, revealed in (his response to their reporting of a new ‘strategic US-Lebanon alliance) ” a number of military secrets unknown to anyone in Lebanon about military bases on Lebanese soil that have been around for more than 30 years but have never been noticed by any other ambassador before him, or even by a military attaché or even by a single border smuggler”.

The State Department is not happy about this and the Ambassador’s end of assignment Evaluation Report being compiled on the 5 th floor of the State Department at Foggy Bottom may reflect his verbal indiscretions and remarkable lackof success in advancing objectives of the Welch Club. For an ambitious FSO, the Lebanon posting is normally not a great career advancer.

In proper and fair minded defense of Jeffrey Feltman, it must be publicly acknowledged that he has not ‘lost Lebanon’ by himself. The Bush administration has lost Lebanon by intensifying more than 30 years of wrongheaded policies that harmed both Lebanon and the national interests of the American people as well as the whole of the Middle East and beyond.

Nor is Feltman the first ambassador to be saddled with mixed signals from home while trying to explain to his host country what his government has in mind. But one of Feltman’s problem is that the Lebanese public, throughout the 18 confessions and beyond, are highly literate, sophisticated politically, and have an excellent idea what the Bush administration intends despite the latter’s obfuscations.

Feltman’s tough job has been to convince Lebanon to be grateful for his service and remember the fact that before the July 2006 Israeli aggression, US aid to their country was was nil and was only increased with his help after the July War to nearly 250 million with promises of eventually up to possibly a half billion dollars. Not much compared to the total annual US largesse of over 8 billon dollars to Israel (on and under the table) but then again, as they say in this observer’s DC neighborhood, ‘dog, that ain’t chump change’.

It required all Jeffrey’s diplomatic skills to try to make the people of Lebanon forget that he helped prolong the July 2006 slaughter by pushing on them the ‘birth pangs of the new middle east” message of his boss Ms. Rice, and to overlook his demands for Lebanese gratitude and patience during the war while more and more civilians were killed until ” a sustainable ceasefire could be arranged”

During the last days of his tenure, Feltman habitually reminds his Lebanese audiences of ” the martyrs of the Lebanese army who fell in the fight against Fatah Al-Islam terrorists” while forgetting the martyrs from the same army killed by US panes supplied to Israel and equipped with American-made bombs while they were sleeping in their barracks and tents between the 12th of July and the 13th of August, 2006.

Feltman inherited a lot of pitfalls and he faced a daunting task because history has rather thoroughly condemned the Bush administration in American eyes as well as in the minds of the people of the Middle East. Bush Administration credibility in Lebanon is zero.

Feltman failed and the US lost Lebanon, for at least the foreseeable future, for a number of reasons including Bush administration support for Israel’s continuing occupation of Palestine and intensification of human rights violations there and the US aggression in Iraq.

Foreigners living in Lebanon are often amazed and the level of knowledge among the populations here, which includes thousands of Iraqi refugees, and how they can rattle of the statistics on Iraq: 3,847 US soldiers dead, nearly 28,999 wounded, but over 600,000 Iraqi casualties and two million Iraqi refugees and two million internally displaced. This pipeline of information direct from the Iraqi refugees in Lebanon and nearly 1.5 million taken lin by Syria convince Lebanon that the Bush war in Iraq and the nearly incalcuable and mounting death toll was all for nothing. Abolutely nothing. Most Lebanese want no part of US projects in their country.

A History and Fine Arts major in college, Feltman sometimes sounds ‘preachy’ when he frequently threatens no economic aid to Lebanon “unless it fully implements UN Resolutions”. Those he has in mind include Security Council Resolution 1559 “disarming militias”, not SCR 425, or 1701 both of which require Israel to withdraw from Lebanese territory including Shebba Farms and Ghajar, and stop its nearly daily violations of Lebanese sovereignty .

Some Lebanese don’t grasp Feltman’s meaning when he regularly states “the United States will support the Lebanese people’s choice for a freely elected President as long as there is no outside interference, or undue influence from terrorist or undemocratic forces.” That there is daily “interference from US outsiders” is pointed out nearly every Friday by the senior Shia cleric Mohammad Hussein Fadlallah during his weekly sermons in Haret Hreik.

In the final analysis, Jeffrey Feltman’s work record, including his nearly 7 years in Israel and 40 months in Lebanon suggests that Israel arranged for Feltman to be posted to Lebanon to do Israel’s work.

In that task he succeeded, but many of the nearly 50,000 US citizens in Lebanon think we Americans can do better next time by bringing in an envoy that will put American and Lebanese interests before Israel’s.

October 27th, 2007, 5:42 am


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