With the progressive transfer of economic power from private enterprise to the state, public finance became a major economic determinant. Even though the government's fiscal responsibilities increased during the early 1960s, budgetary practices changed little until 1967, when legislation established a single, consolidated, and centralized annual budget that covered all spending units of the public sector. This budget was closely geared to development plans and complemented a reorganization of the banking system. Under the law each budgeted outlay was to be matched by the funds required to finance it.

The budget legislation was accompanied by a reorganization of the Ministry of Finance and of auditing and statistical services. An annual foreign exchange budget was instituted to preview probable foreign exchange receipts and expenditures, thus allowing the Ministry of Finance and the planning organization to anticipate the government's needs in foreign and local currencies.

The new law required that budget accounts be closed 30 days after the end of the fiscal year. Unused funds were to be returned to the treasury, although those already committed were to be place in special, segregated accounts in the treasury. This stopped the previous practice whereby transactions continued to be recorded on budget accounts for several years after the end of a fiscal year.

Since 1970, when the state introduced the consolidated budget, all expenditures and receipts of the ministries, the central public sector administrative agencies, the public sector economic enterprises, and the local, municipal, and religious administrative units have been combined into one budget. Expenditures and receipts of the ministries and central government administrative units were included in the general budget in full other units were represented by inclusion of the net total surplus or deficit of their respective budgets. Economic units financed almost none of their own expansion. Instead they turned any surplus (profit) back to the government and received funds via budget expenditures for investments.

Although budgetary practices improved and the budget became a more useful tool for officials, published budget data in the late 1980s remained a difficult source from which to interpret developments in the economy. Expenditures and receipts continued to be published as proposals only. Actual expenditures and receipts were not available, although fragmentary data gave indications of shortfalls moreover, the proposed budgets were balanced, and such important balancing items as proposed domestic borrowing and anticipated foreign aid were not clearly designated. Thus it was impossible to determine how effective the government was in implementing programs, whether deficits were incurred and, if so, their size, and how dependent the government was on external assistance. The uncertainties may have been intentional for security reasons.

The budget gave few clues about the extent of Syria's economic malaise in the mid-1980s. For example, it did not reflect the rapid depreciation of the Syrian pound, the steep rise indec in prices, the shortages of basic commodities, nor the acute foreign exchange crisis which compelled the government to reduce imports. However, budget data during the mid-1980s clearly depicted the mood of austerity underlying economic policy as well as the government's commitment to reducing expenditures. The 1986 budget revealed a major decrease in expenditure in real terms for the third consecutive year, as inflation--estimated at between 20 to 30 percent--negated the 2 percent increase in spending (see table 7, Summary of Proposed Budget Expenditures, 1983-1985, Appendix).

Defense spending towered above all other budgetary allocations in the 1980s (see The Armed Forces and Society , ch. 5). The cost of Syria's military presence in Lebanon since 1976, coupled with the government's desire to reach strategic parity with Israel, accounted for the level of spending (see Regional Foreign Relations , ch. 5). Defense spending averaged over 50 percent of current expenditures in the mid-1980s, accounting for about 30 percent of total spending.

Agricultural development also benefited from high allocations in the mid-1980s designed to counteract the governmental neglect of the 1970s. In 1985 allocations rose 22 percent above 1984 figures, amounting to 20 percent of total spending. In 1986 figures indicated a 5 percent investment increase for the agricultural sector.

Allocations for the mining industry (including petroleum) increased substantially in the 1986 investment budget. The 1986 allocations rose 46 percent above 1985 levels as government officials targeted increased petroleum and phosphate production and export in the Sixth Five-Year Plan.

However, budget deficits continued in the 1980s because of the rapid increase in defense expenditures and falling revenues from exports. The government financed the deficit through domestic borrowing and foreign aid. However, in the mid 1980s, budgeted foreign aid grants greatly exceeded actual disbursements by donors because of depressed economic conditions in the Arab oil-exporting states. Although Syria budgeted LS1.96 billion (for value of the Syrian pound--see Glossary) in foreign aid grants in 1986, the country expected to receive only about one-fifth of this figure and to incur a substantial budget deficit. However, the country's internal and external public debt remained moderate and did not impose an oppressive annual repayment burden.

Data as of April 1987