Less subsidies and a larger deficit: 2023 budget does not bode well for Syrians
Enab Baladi – Jana al-Issa
The Syrian regime’s government approved, on 25 October, the state’s draft general budget for the year 2023 at an amount of 16,550 billion Syrian pounds, which included 13,550 billion pounds for current spending and 3,000 billion pounds for investment spending.
As every year, the value of the general budget appropriations increased in Syrian pounds, but it declined due to the deteriorating value of the pound against the US dollar.
The social subsidy block within the draft budget for next year amounted to 4,927 billion pounds, which means a decrease in its value from 2022 by about 12%, as its value amounted to 5,529 billion pounds.
The salary, wages, and compensation block was approved at about 2,114 billion Syrian pounds, an “increase” over its value in the current year’s budget, which amounted to 1,586 billion Syrian pounds.
The state’s general budget deficit for the year 2023 is about 4,860 billion Syrian pounds, registering an increase over the value of the 2022 budget deficit by about 19.65% when it amounted to about 4,118 billion Syrian pounds.
In this report, Enab Baladi is trying to study the impact of next year’s budget numbers, especially the social subsidy and salaries and wages blocks, on residents in regime-controlled areas, amid government talk about improving living conditions, based on appropriations that “increased” in Syrian pounds compared to last year.
Social subsidization locked in paper plans
Despite the actual decrease in subsidies amount in the budget draft, according to the appropriations approved by the government of the regime, the Minister of Finance, Kinan Yaghi, denied this, justifying by saying, “Social subsidy has not decreased but rather increased, but the methods of dealing with it differ between appropriations that will be spent from the budget and another section through loans and financial entanglements.”
In an interview with the local al-Watan newspaper on 1 November, Yaghi considered that the total social subsidization that the government will bear during the next year is estimated at 13,565 billion pounds, compared to 9,181 billion pounds in 2022.
The finance minister added that “total social support never decreased, but increased over the next year by 4,384 billion pounds, about 47.7%.”
Whereas, a report published in the ruling-party tongue, al-Baath newspaper, on 9 November, confirmed that the social subsidization block in all budgets of different years remains “ink on paper” as long as the ministry does not annually announce the amount of actual spending, indicating with evidence that subsidies for citizens have declined more and more.
Al-Baath indicated that family allocations of gas cylinders decreased from 12 to 3 cylinders annually, and family allocations of diesel fuel decreased from 1,000 liters at a price of 8 pounds per liter, to a maximum of 100 liters per year, at a price of 500 pounds per liter.
The distribution of subsidized sugar and rice also decreased from once a month to less than three times annually through the so-called “batches,” with the price of one kilogram of each being raised by 100%, in addition to canceling the distribution of tea and limiting the distribution of subsidized cooking oil once or twice a year.
The al-Baath report confirmed that the liberalization of fuel prices led to a rise in the prices of all goods and services to the point where consumption shrank and production declined, and that free education is no longer free because educational requirements such as clothes, books, and stationery require a bank loan, and medicine is also no longer free due to the high prices of medicines to levels beyond the purchasing power of people who suffer chronic diseases.
Signs of further cut in subsidization
Firas Shaabo, expert in banking and financial sciences, told Enab Baladi that the government of the regime claims every year to increase the share of social support within the general budget, which in turn also increases.
However, the increase is only in the Syrian pound, which is matched by a decline in its value against the US dollar, he added.
Dr. Shaabo explained that the high rate of budget deficit is evidence of the regime’s approach to a policy of lifting subsidies to ease its burdens, and its continuation with this policy is not excluded, as it moves to privatize sectors to evade subsidies.
The expert believes that the policy of increasing the tax savings, such as the fees and taxes that it imposes from time to time, and the effect of this on raising prices, fully illustrates the government’s inability to continue with subsidies, which makes it depend on taxes as a primary source to supplement its treasury with funds.
The researcher in political economy, Yahya al-Sayed Omar, said last July in an interview with Enab Baladi that the government of the regime seeks to lift subsidization from large segments of the citizens, but it does so in batches, with the aim of absorbing the resentment and anger of society.
The Syrian regime is trying not to repeat what happened last February when the subsidization was lifted from about 600,000 people in one day, which sparked a wide social and media uproar accompanied by criticism.
Al-Sayed Omar considered that excluding people in installments reduces this “stir” to its minimum limits.
The analyst expected the continuation of the regime’s government policy in this matter by removing new categories from the “subsidy umbrella” to reach its ultimate goal, which is to keep less than 50 percent of the residents in its areas of control within the support program, noting that many unions are threatened with deprivation of support in the future.
Dr. Hassan Hazouri, a professor of economics at the University of Aleppo, said that the social subsidy figures within the next year’s budget were set “randomly,” and it is far from scientific and objective methods.
Hazouri added, in his interview with al-Baath newspaper, that the result of the inflation was that the amounts approved in their entirety are less than last year as purchasing power, contrary to what was stated by the finance minister.
“Valueless” increase in salaries
Regarding the possibility of increasing salaries during the next year based on budget appropriations, Minister of Finance Kinan Yaghi said that in previous budgets, he did not directly notice allocations for salary increases and wages, explaining that if the salary increases were approved during the year, they were covered from the savings of all sections of the budget.
As for the draft budget for the year 2023, Yaghi indicated that funds had been allocated for any increase in salaries and wages that can take place or for the disbursement of financial grants.
This will be within the current reserve funds, according to the minister, who considered that this matter is linked to the revenues collected for the state treasury and the improvement of the economic actuality.
Dr. Rasha Syroub, professor of Economics at the University of Quneitra, said the salaries and wages block did not rise since last year.
Syroub explained that the increase is an accounting inclusion of the increases in salaries for the current year because they were not included in the 2022 budget, as it is customary for the increase to be issued after the budget is approved.
The economist Firas Shaabo told Enab Baladi that residents in Syria need an increase of about 500% in salaries to be called an actual increase, while when it occurs by 20 or even 30%, it does not bring about a major change in the lives of citizens.
Shaabo considered that if the government of the regime works to increase salaries during the next year, it will be a “sham” rather than a real increase because “it will be accompanied, as every time, with a large rise in prices, given that the policy of supply and demand in Syria is not activated.
“When wages are raised, the money supply in the markets decreases, and due to the lack of flexibility in supply to meet the existing demand, prices rise in parallel,” according to Shaabo.
He added that the Syrian economy is spinning in a vicious circle, especially with regard to salaries and prices.
Official recognition: “Doesn’t keep up with inflation”
Finance Minister Kinan Yaghi admitted that the budget does not keep pace with the high inflation rates in Syria, justifying that if inflation was kept up, “we would find ourselves facing budget estimates of more than three times the current number,” he said, adding that this would lead to an exacerbation of the deficit and the need for currency issues. Without covering it in return, thus fueling inflation more and more, as he put it.
Manhal Hannawi, assistant minister of finance for public expenditure affairs, confirmed that the 2023 budget does not achieve what is required and does not take into account price fluctuations or inflation, which has reached record numbers.
The state’s general budget deficit for 2023 amounts to about 4,860 billion Syrian pounds (about 1.9 billion US dollars, according to the official exchange rate set at 2,500 pounds), based on estimates of public revenues, which amount to 11,690 billion pounds.
A budget deficit is defined as a situation in which expenditures exceed the volume of revenues during a specific period of time, whereby individual or government spending is more than available revenues.
The accumulated government deficit at the state level constitutes the national debt of the state. In order to address this situation, some expenditures are being reduced, or income-generating activities are being increased.
The deficit leads to slower economic growth, higher tax revenues, and higher unemployment rates.
(1 USD = 2500 SYP due to Central Bank, but the pound is trading around 5,400 to the dollar)
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