Syria Brief: Economic Crisis – 15 August 2022
Between now and the end of the year, the Syrian regime plans to drastically cut what remains of Syria’s subsidy system and purge the majority of beneficiaries still on its subsidy rolls. While in many ways, these measures are a reaction to the regime’s grim financial realities and inability to cover the costs of subsidies, much less basic services, these cuts will plunge ordinary Syrians into even deeper poverty. However, even amidst this unprecedented austerity drive, public criticism of the Assad regime will remain muted, with any murmurs of dissent quickly suppressed, leaving many Syrians now to face a very real choice between severe hunger or torture or disappearance. With the country’s middle-class decimated, even once well-established professionals are forced to work multiple jobs wherever they can find them and yet are still unable to make ends meet. Remittances now stand as one of the few remaining protections for struggling families, and Syrians are now relying more heavily on family abroad for financial support and, ultimately, finding pathways to leave the country. The economic decimation of this once self-sufficient and industrious country will continue to have consequences on regional stability for decades to come.
- Exchange rate: The Syrian pound depreciated further over the last month, hitting its lowest value in more than 18 months at an actual exchange rate of 4,650 Syrian pounds (SYP) to the dollar. This steady depreciation began following the shockwaves to the global economy after Russia’s invasion of Ukraine in February of this year, leading to the value of the Syrian pound falling by almost 25% in the past six months. The surging value of the dollar, high fuel and commodity prices as well as high costs of imports are all contributing to the pound’s declining value.
–Disastrous harvest: Regime estimates of the final totals for the 2022 grain harvest have been announced as approximately 512,000 tons, raising the specter of severe hunger for Syrians in the months ahead. This figure accounts for wheat that was bought by Syrian traders, the Foundation for Seed Multiplication (Haboob), the Feed Corporation and the General Organization for Mills. The cumulative result of regime mismanagement and an historic drought have combined to deliver the country one of the worst harvests in Syria’s modern history.
–Shortages: As a result of the regime’s intense focus on increasing the wheat harvest this year, it redirected resources at the expense of other strategic crops, most notably barely.
–Fodder costs: Consequently, barley shortages are already dangerously destabilizing the Syrian livestock industry and prices for fodder have exploded across the country. High fodder costs are pushing many farmers to sell their livestock in growing numbers, and caused a dramatic increase in the cost of some meat products.
Regime Mitigation Measures
- Austerity measures:
–Anticipated reductions: In the coming months, the regime is preparing to rollout the next phase in its austerity blueprint. This will be the most radical and consequential step, which will see the removal of the remainder of the Syrian population from subsidy eligibility and redirecting a portion of these cost savings towards public sector employees. Apart from removing further segments of the population from subsidy rolls, dramatic cost increases are expected in the cost of bread, electricity and fuel as the differential between the actual costs of these goods and their subsidized prices is creating an enormous deficit.
-Rising poverty: The regime sees this evolution in public spending as a crucial step towards shoring up the support of government employees, which Assad views as the bedrock of the Syrian state’s continuity. However, the vast majority of the Syrian population has plunged deeper into poverty as a result of these austerity policies, although the regime appears unconcerned with this development. Amidst this austerity drive, most public criticism of the Assad regime has been muted or quickly suppressed, leaving many Syrians now facing with a very real choice between starvation or torture or disappearance.
-Coping mechanisms: Most Syrians, even those who were once well-established, middle-class professionals, now work multiple jobs and are still unable to make ends meet. With the growing hopelessness over the country’s future, Syrians are trying to find a way to leave and are increasingly dependent on remittances from their family abroad as prices of goods and services skyrocket and subsidies are cut. It is not uncommon now to hear of parents pushing their children to leave the country instead of pursuing their studies and professional opportunities within Syria, as economically, the income from any professional job in Syria is not enough to cover living costs.
- Imports: The regime announced that the Central Bank will finance the import of only three staples from abroad – wheat, infant formula, and specific types of medicine that can only be obtained from outside of Syria – at a preferential exchange rate of 2500SYP.