Monetary Policy

Vision

The vision of the Central Bank of Syria is centered on maintaining monetary and financial stability. This objective is essential for achieving the broader goals of macroeconomic policy. Central to this vision is the establishment of an effective monetary policy. This policy aims to stabilize the exchange rate of the Syrian pound and maintain a low and stable inflation rate. By achieving these objectives, the Central Bank contributes to creating an environment conducive to investment and supporting economic growth. Additionally, the Central Bank recognizes the importance of adopting electronic payment tools which serve as vital instruments for both short- and long-term goals.

Values

·       Credibility: The Central Bank of Syria works to enhance its credibility through its commitment to achieving the objectives of monetary policy.

·       Transparency: The Central Bank of Syria is committed to securing necessary and accurate information and data. This commitment extends to its own activities, the activities of the financial and banking sector, and those of other sectors within the national economy.

·       Belonging: In its management of monetary policy, the Central Bank of Syria seeks to prioritizes public benefit. It also works to secure monetary and financial stability to support the growth of the national economy. Moreover, the Central Bank of Syria takes responsibility for the decisions it makes.

The Central Bank of Syria is a public institution with financial and administrative independence. It implements the monetary policy decided by the Monetary and Credit Council and operates under the supervision and guarantee of the state. It functions within the general directions of the economic policy approved by the Council of Ministers.

The Central Bank of Syria carries out the following tasks:

·       The Central Bank of Syria serves as the state bank and exercises its functions within the territory of the Syrian Arab Republic and beyond.

·       The Central Bank of Syria has the responsibility of issuing currency on behalf of the state.

The state may entrust the Central Bank with the authority to issue short-term, medium-term, or long-term treasury bonds, as well as manage the processes of exchanging and repaying them, subject to conditions determined by the Council of Ministers. Additionally, the Central Bank may be entrusted with other financial tasks related to loans issued or guaranteed by the state. The bank also participates in negotiations for external loans conducted on behalf of the state or represents the state in such negotiations under conditions determined by the Minister of Economy and Foreign Trade. Furthermore, the Central Bank assists the government and its representatives in their dealings with international financial organizations.

• Supervising and monitoring banks in accordance with the directives of the Monetary and Credit Council.
• Conducting all studies and compiling statistics related to the status of banks and banking activities in the country.
• Monitoring matters related to banking risks, collecting information on credit risks associated with bank customers periodically, and communicating it confidentially and promptly to the relevant banks.
• The Central Bank of Syria is responsible for carrying out banking operations belonging to the state or its institutions, which are subject to special legal provisions. These operations are conducted in accordance with the provisions outlined in relevant laws and regulations, and are backed by a state guarantee.
• The Central Bank of Syria is tasked with managing the exchange office.
• It carries out all exchange operations with foreign entities, including obtaining credits from abroad with or without guarantees, granting credits abroad, re-discounting or mortgaging its transactions abroad, and ensuring the proper execution of these transactions and associated credit operations.
• It participates in negotiations of international agreements for payments, exchange, and clearing, is entrusted with their implementation, and concludes all practical agreements necessary to execute the aforementioned agreements.
• The Central Bank of Syria has the authority, by decision of the Council of Ministers based on the proposal of the Monetary and Credit Council and the approval of the Minister of Economy and Foreign Trade, to regulate, when necessary, the operations of banks and other financial institutions subject to state control or under its guarantee.
• Conducting all gold and foreign exchange operations.
• Discounting bills of exchange and commercial bonds, purchasing and relinquishing them, and providing loans and advances for various economic activities.
• Discounting short-term bonds issued or guaranteed by the state.
• Purchasing medium-term and long-term bonds issued or guaranteed by the state, relinquishing them, and conducting bond repurchase (repo) operations.
• Providing loans and advances to the state or guaranteeing them.

Traditional certificates of deposits are issued in accordance with the system outlined by the Central Bank of Syria for issuing traditional deposit certificates in Syrian pounds. This system is defined by the Monetary and Credit Council Decision No. 185, dated 9 December 2018, and its executive instructions issued by the Central Bank of Syria Management Committee Decision No. 132, dated 04 February 2019.

The Central Bank employs certificates of deposit to augment its capacity in regulating local liquidity through the establishment of novel financial instruments tailored for liquidity management, harmonized with the current situation, based on vigilant monitoring of market dynamics. The purpose is to fortify the framework for an efficacious monetary policy and bolster the Central Bank’s capability to realize its objectives over the medium and long term. This endeavor is facilitated through the activation of available open market tools, thereby fostering the broader development of the financial landscape, especially the interbank market.

The certificates additionally facilitate the creation of a novel avenue for deploying bank funds, thereby incentivizing financial institutions to solicit fresh deposits into the banking sector. This is achieved through the introduction of innovative banking products tailored to meet the diverse needs of the public, resulting in a favorable impact on the depositor base.

In this context, the Central Bank of Syria has issued four tranches of traditional certificates of deposit denominated in Syrian pounds to established traditional banks. It is noteworthy that the Central Bank of Syria has duly settled the values of the certificates of deposit to all issues, fulfilling all associated obligations to the respective holders.

The following table shows the results of these issues:

Medium- and long-term government securities, with maturities ranging from one to 30 years, are issued at their nominal value and carry a fixed interest rate throughout the life of the bond. These treasury bonds are typically issued through multiple-price auctions.

These bonds are issued in accordance with the provisions of Legislative Decree No. 60 of 2007, its executive instructions and the Government Securities Operations Manual. This authorized the Ministry of Finance, in coordination with the Central Bank of Syria (issuing agent), to issue government securities (treasury bills and bonds).

The issuance of government securities aims to effectively manage public debt based on providing sources of financing for both current and investment expenditures of the Ministry of Finance, using financial instruments. These instruments are designed to avoid contributing to inflationary pressures while positively impacting monetary and financial policies, as well as the national economy as a whole. Treasury bills and bonds are considered the most significant tools for meeting the financing needs of the Ministry of Finance.

The Central Bank of Syria plays a multifaceted role encompassing operations, regulation, supervision, and oversight of payment, clearing, and settlement systems. It is tasked with achieving and ensuring financial stability through the safety and efficiency of various payment systems. This is achieved by leveraging a national electronic payment infrastructure, which establishes robust banking and financial systems capable of meeting the continuity and availability requirements of electronic banking services across all sectors, thereby bolstering support for the national economy. The national electronic payment infrastructure comprises the following electronic payment systems:

1. Syrian Gross Settlements (SYGS) for the settlement of high-value payments between financial institutions.
2. Electronic banking services clearing, also known as National Switch.
3. Electronic check clearing.

In addition to various payment, clearing, and settlement systems and other financial technologies that contribute to enhancing the effectiveness of monetary policy tools by promoting financial inclusion and stability. This responsibility falls under the purview of the Payment Systems Directorate, which carries out the following functions:

1. Developing and drafting operational and regulatory instructions for electronic payment and financial technologies within the Central Bank of Syria, subject to appropriate approval processes.
2. Licensing electronic payment companies in accordance with relevant decisions and regulations governing their operations.
3. Participating in the assessment of financial institutions' utilization of electronic payment systems and financial technologies.
4. Participating in the development of regulatory frameworks for electronic payment systems, electronic payment methods, financial technologies, and electronic banking services at financial institutions, in collaboration with the Banking Supervision Department, to ensure appropriate approval.
5. Managing and operating the payment, clearing, settlement, and electronic financial transfer systems operated by the Central Bank of Syria.
6. Proposing decisions and instructions for the security and protection of information related to electronic payment systems and their financial tools and technologies, in coordination with the Information Technology Directorate and the Banking Supervision Department.
7. Developing plans to train and qualify human resources to advance in electronic payment and its associated financial technologies.
8. Conducting studies, compiling statistics, and generating periodic reports in the field of electronic payment and financial technologies.
9. Representing the Central Bank of Syria in matters related to electronic payment, clearing, and settlement.
10. Overseeing the payment, clearing, and settlement systems operated by the Central Bank of Syria.
11. Supervising electronic payment systems and financial technologies operated by financial institutions, in coordination with the Banking Supervision Department.
12. Monitoring electronic payment companies' adherence to laws, decisions, and instructions governing electronic payment, financial technologies, and related services, as well as directives from Combating Money Laundering and Terrorism Financing Commission.