Syria Brief: Economic Crisis – 20 November 2022
The Syrian regime announced its draft budget for 2023, which reiterated the regime’s intention to press on with aggressive austerity measures into the next year. Perhaps most significantly, allocations for subsidies, which have been a lifeline for many Syrians throughout the ongoing economic crisis, will be reduced by 40 percent next year while subsidy cuts for this year have continued in the meantime. With fuel allocations being further reduced and no indications of subsidies for vital agricultural inputs, many farmers are already unable to afford to plant strategic crops such as wheat and barley during the current season. At the same time, public sector salaries are expected to increase next year based on allocations in the draft budget, but they will remain insufficient to meet the skyrocketing prices for basic goods. Widespread resignations and absenteeism among public sector employees continue to further undermine already suffering essential services, such as health and education. In many areas, the regime has pushed communities to find local solutions to resourcing these services, often through fundraising efforts from the Syrian diaspora. While Syria’s economy rapidly deteriorates, the Assad regime relies on longstanding malign and predatory tactics to entrench itself. Rather than taking overt steps to demonstrate good-faith efforts to manage the country’s economic decline, the Assads are instead consolidating their control over Syrian business, extorting and pushing out the country’s traditional business elite and driving capital flight that would have been instrumental for local recovery efforts.
- Exchange rate: The Syrian pound has continued to fall over the last month, although the rate of its decline has slowed down. The actual exchange rate is now valued at approximately 5,300 Syrian pounds (SYP) to the dollar. There is now more than a 40% difference between the actual rate and the regime’s official exchange rate, pegged at 3,015 SYP to the dollar. High import costs and high fuel and commodity prices––which are only expected to rise over the winter months––are all contributing to the pound’s falling value and in turn, driving up the cost of basic goods.
- Strategic crops:
– Upcoming season: Early November marks the beginning of planting season for strategic crops, namely wheat and barley, and the rainfall during the winter season will be instrumental in determining the fate of next year’s harvest. In the meantime, the regime has not announced any subsidized support to farmers for key agricultural inputs such as seeds, fertilizers and fuel, and there is little expectation that this support will be forthcoming.
– Olive harvest: The olive harvest in regime-held parts of Syria was lacking this year. This marks another blow to Syria’s agricultural sector, especially given the fact that olive oil comprises the country’s most important legitimate export. In Daraa province, the number of olive trees has declined from six million to just 800,000 during the course of the conflict. To make matters worse, the costs of cultivation and processing a tin of olive oil now exceeds the profit margin from its sale.
Regime’s Mitigation Measures
- Annual Budget:
– Draft budget for 2023: The draft general budget for 2023 was announced by the regime, with a total amount of 16,550 billion SYP––an increase of 24% compared with last year’s budget, but a decrease of 15% based on the actual exchange rate. Allocations for subsidies were decreased by almost 40% for next year based on the actual exchange rate, indicating that the regime intends to continue implementing aggressive austerity measures in the coming year. At the same time, allocations for public sector salaries increased by 33% in 2023, however, this is expected to have limited impact due to the depreciation of the Syrian currency and decline in Syrians’ purchasing power.
– UN statement: The UN special rapporteur specifically mandated with assessing the “negative impact of unilateral coercive measures on the enjoyment of human rights” in early November called on states and regional actors to lift all unilateral sanctions on Syria, especially those impacting prospects of early recovery activities. While sanctions have a chilling effect of the Syrian economy, the primary root of Syria’s economic woes remains the Assad regime, which has destroyed much of the country’s productive economic infrastructure, consistently extorts funds from Syrian businessmen, consolidates its hold over Syrian business at the expense of traditional business elites and is pushing Syrian talent to emigrate from the country due to security fears and dire economic prospects. Recent efforts made by sanctioning countries to ease the operational environmental for humanitarian aid and stabilization programming in Syria should continue, while acknowledging that targeted sanctions remain an important tool for curtailing the Syrian regime’s human rights abuses and malign activities.
- Living Conditions:
–Community resilience: As the country’s economic collapse continues, the Syrian regime is failing to provide funding to service sectors, pushing communities to increasingly rely on themselves to address basic service needs. In south-west Syria, for example, many towns have community committees independent of the regime-appointed municipal councils that are responsible for fundraising within local communities as well as the Syrian diaspora to meet service needs. Community-funded projects have included supporting teachers’ transportation costs, carrying out basic repairs to schools and water infrastructure and purchasing medical supplies for clinics and hospitals. At the same time, resignations and absenteeism among public sector employees is rampant, undermining the functioning of essential services such as education and health.