Amid calls and demands to lift international sanctions on Syria as a necessary step to revive the country's economy, which has been plagued by corruption and nearly 14 years of civil war, the new Syrian leadership faces a daunting challenge in rebuilding the economy. Some Western reports described Syria's economic crisis as perhaps "more difficult than removing the Assad regime" at the end of last year. Syria needs significant external aid to relaunch its economy, which has deteriorated sharply in recent years.
Donors participating in a conference hosted by the European Union on March 17 pledged €5.8 billion (USD6.3 billion) to support the new Syrian authorities in addressing the humanitarian and security challenges they face following the fall of President Bashar al-Assad.
The World Bank estimates that the Syrian economy declined by nearly half during the decade from 2010 to 2021, but the bank itself believes this estimate is significantly lower. Up to 90 percent of Syria's 23 million population live below the poverty line, according to estimates by various UN agencies.
According to data from international institutions, the size of the Syrian economy in 2022 reached only USD23.63 billion, equivalent to the economies of Albania or Armenia, neither of which has a population of more than 3 million.
The Syrian economy continues to deteriorate
The Syrian economy has deteriorated more sharply since 2019 when neighbouring Lebanon experienced a financial crisis that affected it. This is because of the intertwined trade and financial relations between the two countries. At the time, Syria’s capital, Damascus,was forced to adopt fixed exchange rates, but the new transitional government has promised to unify the exchange rate system. The official exchange rate of the Syrian pound was 47 to the dollar at the beginning of 2011. However, by the end of Assad regime's rule about three months ago, the US dollar had reached 22,000 Egyptian pounds on the black market. A few days ago, the unified exchange rate in Syria was around 13,000 pounds to the US dollar.
Syria’s Central Bank's reserves are “very small”, according to the transitional government’s head, Mohammed al-Bashir. Reuters, citing bank sources, reported that the bank's vaults held only $200 million and 26 tonnes of gold, valued at market prices at USD2.2 billion.
The extent of the decline is evident when comparing these reserves to their levels in 2010, when the International Monetary Fund (IMF) estimated Syria's foreign exchange reserves to be $18.5 billion, covering three months of imports.
Western governments froze hundreds of millions of dollars in Syria's foreign assets when they imposed sanctions on Syria. However, accurately estimating the amount of frozen assets is difficult. Western governments have allowed the new Syrian government to use some of its frozen assets abroad to meet humanitarian needs. The government also expects to recover approximately $400 million of these funds to be used for a 400 percent salary increase, as promised.
The Syrian economy's decline is affecting all sectors
The decline has not been limited to tourism and other export revenue sources in general. All sectors of the Syrian economy have witnessed a dramatic decline over the past decade and a half. One of the sectors that has seen the greatest economic damage is energy. In 2010, Syria was producing 380,000 barrels of oil per day, but the following year, with the outbreak of the civil war, this source of hard currency evaporated, Extremist factions,including ISIS and others, divided control of Syria's oil wells with armed Kurdish groups.
When Western sanctions were in place, Syria relied on energy imports from its allies, Iran and Russia. According to Rachel Ziemba, senior consultant at risk consultancy Horizon Engineering, Syria used to import between one and three million barrels of fuel per month from Iran, but these imports stopped in December 2024 with the collapse of the Assad regime.
Agriculture has also severely deteriorated,the number of farmers has dwindled, compounded by successive droughts, irrigation systems have collapsed, and obtaining seeds and fertilizer is hard.
Photo: Syria has many economic challenges ahead (by Adobe)