Higher wages, priority spending drive Syria’s $1 billion first-half deficit

Higher salaries and wages, expanded spending on government priorities and rising import costs pushed Syria’s public expenditure sharply higher in the first half of 2026, resulting in a fiscal deficit of about $1 billion despite strong growth in state revenue.

Public expenditure reached about $3.7 billion during the six-month period, up 331% from a year earlier, while revenue rose 111% to about $2.7 billion, Finance Minister Mohammed Yisr Barnieh said, citing the Finance Ministry’s latest report on state budget performance.

Barnieh attributed the much faster rise in expenditure mainly to salary and wage increases, expanded spending on government priorities and higher costs for some goods, services and inputs due to regional developments and rising import prices.

The deficit therefore did not result from falling state revenue. Revenue more than doubled from a year earlier, but expenditure increased more than fourfold as the government implemented higher wages and expanded spending under a substantially larger 2026 budget.

A timing factor also affected the revenue side. Barnieh said oil and gas proceeds began being transferred to the Finance Ministry only in May, meaning a major source of projected state revenue was reflected for only part of the first-half reporting period.

Revenue reached about 31% of the annual estimate in the first six months, while expenditure accounted for around 35% of approved spending.

Bigger 2026 budget drives spending higher

The sharp rise in expenditure comes as Syria implements a 2026 budget that envisages significantly higher government spending than last year.

The Citizens Budget issued by the Finance Ministry in April projected expenditure of about 1.1567 trillion new Syrian pounds, equivalent to $10.516 billion, compared with actual spending of around $3.45 billion in 2025.

Of planned 2026 expenditure, 60% is allocated to current spending, 27% to investment and 13% to subsidies and social security.

When launching the budget, Barnieh said wage and salary reform would continue, while improving basic services, particularly health and education, remained a government priority. He also said low-income and poor households were at the center of budget policies.

The first-half spending increase also reflected higher government costs. Barnieh said regional developments and rising import prices had increased the cost of some goods, services and inputs.

Spending is expected to remain under upward pressure in the second half as the full impact of higher salaries and wages appears in government accounts and implementation of projects and investment expenditure gathers pace, particularly in support of affected areas.

Deficit follows first budget surplus since 1990

The first-half deficit marks a sharp shift from Syria’s fiscal performance in 2025, when the country recorded its first annual budget surplus since 1990.

Public revenue reached about 384.2 billion new Syrian pounds, equivalent to around $3.49 billion, while expenditure stood at about 379.2 billion pounds, or around $3.45 billion, leaving a surplus of nearly 5 billion pounds, or about $46 million.

The surplus was equivalent to around 0.15% of gross domestic product, compared with a deficit equivalent to 2.7% of GDP in 2024.

Revenue rose 120.2% in 2025 from the previous year, while expenditure increased 45.7%. Customs duties accounted for about 39% of revenue, while wages and salaries represented 41% of expenditure.

The surplus had reached nearly $500 million by the end of the third quarter before narrowing in the final three months of 2025 as spending increased and outstanding obligations were settled.

The fiscal framework is considerably larger in 2026. The Citizens Budget projected annual revenue of about 958.8 billion new Syrian pounds, equivalent to $8.716 billion, against planned expenditure of $10.516 billion.

Oil and taxes expected to strengthen second-half revenue

The Finance Ministry expects the revenue side of the budget to strengthen during the remainder of the year as oil and gas receipts make a fuller contribution and tax and customs collection improves.

Under the 2026 budget, taxes, fees and customs are projected to account for 50% of annual revenue, oil and gas for 28%, and other sources for the remaining 22%.

Barnieh said higher oil revenue, improved tax and customs collection and some exceptional revenue were expected to strengthen Treasury resources in the second half.

The government is also overhauling the tax system to improve compliance while stimulating economic activity and reducing the burden on lower-income groups.

The proposed framework includes lower rates and simplified procedures for individuals and businesses, exemptions for low-income earners and essential goods, and incentives aimed at supporting private-sector investment and the recovery of affected businesses.

Barnieh has said stronger economic growth, efforts to combat corruption and tax evasion and increased compliance are expected to improve tax revenue over time.

An International Monetary Fund tax-policy mission reviewed draft legislation with the Finance Ministry and Tax Reform Committee in August, while the government is also modernizing tax and customs administration through electronic invoicing, e-payment systems and a national customs platform.

Stronger economic activity could provide additional support for revenue. Barnieh said in August that Syria’s economy was expected to grow 11.3% in 2026 and that budget revenue was expected to reach nearly $8 billion during the year, compared with the formal Citizens Budget estimate of $8.716 billion published in April.

An IMF consultation mission in July also said restored oil and gas production areas, alongside stronger performance in agriculture and tourism, were expected to support economic growth, production and public revenue.

Revenue and spending both set to rise in second half

The second half is expected to bring stronger revenue but also further increases in expenditure.

On the revenue side, the ministry expects a fuller contribution from oil and gas, improved tax and customs collection and exceptional revenue.

On the expenditure side, higher wages will have a greater impact on government accounts, while project implementation and investment spending are expected to accelerate.

That leaves expenditure management and the pace of revenue growth central to fiscal performance during the remainder of 2026.

Barnieh said the ministry would continue prioritizing spending and managing liquidity and financing within available resources while maintaining fiscal discipline.

Syria’s public finance reforms are also receiving international support. Barnieh said five World Bank grants approved for the country had reached a combined $491 million by August, covering electricity, health, water, public financial management and financial-sector reform.

He stressed that the funding consists of non-repayable grants rather than loans. A separate World Bank review found satisfactory implementation of measures covering public debt sustainability, debt management and transparency, qualifying Syria for increased International Development Association grant allocations for fiscal 2027.

Fiscal discipline in focus as 2027 budget takes shape

The first-half results put fiscal discipline at the center of government policy as the Finance Ministry prepares the 2027 state budget.

The latest financial performance report is the third publication in a series of fiscal disclosures by the ministry, following its report on 2025 financial performance and the 2026 Citizens Budget.

Barnieh said the ministry was moving from publishing approved budget figures alone toward periodically disclosing actual implementation results, allowing Syrians to see what resources enter the budget, where they are directed and how implementation develops during the year.

Work on the 2027 state budget began on June 27, with the draft targeted for completion before the end of the third quarter. The process draws on experience from the 2026 budget while incorporating further updates to budget preparation, implementation and digitalization.

Preliminary planning for 2027 points to higher revenue driven by economic growth and stronger compliance, even without factoring in telecommunications licensing revenue or temporary increases in oil revenue, Barnieh has said.

With both revenue and expenditure expected to rise during the remainder of 2026, the Finance Ministry says it will continue prioritizing spending, managing liquidity and financing within available resources and maintaining fiscal discipline.

Muhammad Fares