Syria Brief: Economic Crisis – November 2021

The regime announced Syria’s annual budget for next year, signaling that it will continue to implement austerity measures across the board, as Syrians are experiencing worsening economic hardship. Bread and fuel shortages across the country continue, with almost half of the bakeries in Daraa forced to close in the last 48 hours due to flour shortages. Monthly subsidized fuel allocations are falling far short of needs, especially with winter approaching and heating required. Meanwhile, the agricultural sector in Syria is deteriorating with the annual rainfall delayed again this year, and reduced investment in local farmers by Syrian businessmen as they are seeking to move their investments out of the country. Meanwhile, a final draft was reached for the agreement between Lebanon, Syria and Jordan to begin supplying Lebanon with Jordanian electricity via Syria, with funding from the World Bank.

This file monitors and analyses the economic crisis in Syria on a monthly basis and includes economic indicators in the attached database.

Economic Indicators

  • Exchange rate: The Syrian pound remained between 3500-3550 SYP to the dollar over the month of October. The regime continues to constrict the money supply in its efforts prevent the further devaluation of the Syrian pound, and is relying on the difference of exchange rates for receiving and disbursing remittances to generate revenue.
  • Wheat:
    – Purchase price: The regime increased the official wheat purchase price for 2021 to 1.5 million SYP per ton, equivalent to approximately $430 per ton. This is the highest that the price has ever been, and comes ahead of the wheat planting season in an attempt to incentivize farmers to grow more wheat. The regime previously raised the purchase price for wheat to 1,275,000 SYP in the summer of 2021 to incentive farmers to sell their crop for this year to the regime, but the regime only managed to meet 20% of the need in regime-controlled areas through the locally-produced crop. The wheat shortage is continuing to impact the country, with almost half of the bakeries in Daraa having closed in the last 48 hours as they have not received any flour.
  • Fuel:
    – Heating: The current allocation of fuel per family of 50 liters per month is insufficient to cover the additional amount of fuel needed by most families for heating in winter. On average, if the 50 liter monthly allocation is used only for heating, it will only be sufficient to cover 10 days of heat in a month. The subsidized price of the 50 liter fuel allocation is 27,000 SYP, but to purchase the same amount on the black market is over 200,000 SYP, which means many families will opt to go without heating for the winter and sell their subsidized allocation on the black market.
  • Agricultural decline:
    – Olive production: The decline of the agricultural sector in Syria is not limited only to wheat, but notably, olive production, which is the second most important agricultural staple in south-west Syria after wheat and has experienced significant deterioration. The olive harvest in the south-west this year is expected to be less than a quarter of 2011’s harvest. Furthermore, the actual cost of processing one tank of olive oil, which generally measures 20 liters and is purchased annually by families to last the whole year, is more than double the regime’s subsidized sale price. As a result, the price of a tank of unsubsidized olive oil is now almost three times the monthly salary of an average public sector employee.

    -Production: The delay in the annual rains again this year is raising concerns of a shortage in next year’s harvest. The delay in rainfall last year was one of the main reasons for the shortage in last year’s wheat supply. The deterioration across key agricultural sectors in Syria raises concerns about the growing inability of Syrians to rely on local markets for basic food items.
    -Middlemen: The growing number of Syrian businessmen leaving the country and seeking to invest elsewhere is also having ramifications on agricultural productions. Farmers usually rely on businessmen for initial financing during planting season, while promising to sell them their harvest. Once the businessmen purchase the farmers’ harvest, they are responsible for transporting the crops and selling to larger-scale distributors.

Regime Economic Mitigation Measures

  • Austerity:
    – Annual budget: The regime approved the budget for 2022, totaling over 13,325 billion SYP, which is a significant increase in the nominal amount of the budget for 2021, valued at 8500 billion SYP. Based on the current unofficial exchange rate, 2022’s budget is valued at $3.8 billion US dollars, but the budget’s actual value is expected to drop with further devaluation of the Syrian pound anticipated for next year.

    -Subsidies: Of 2022’s total budget, the regime has allocated 5,529 billion SYP for subsidizing fuel, bread, electricity and agricultural outputs in the coming year. Based on the current unofficial exchange rate, this is estimated to be $1.5 billion, reflecting the regime’s continuing of austerity measures.

Regime Allies & Neighboring Countries

  • Iran:
    – Power plant repairs: The regime reached an agreement with the Iranian company Bima-Nir (بيما نير) to maintain the Mahardah (محردة) power plant in Hama for the next 26 months, with the contract being valued at $115 million. The regime has signed several such agreements with Iran over the last few years to conduct maintenance on its electricity infrastructure. The Mahardah power plant is separate from the electricity grid that is being considered to supply Lebanon with electricity as part of the regional energy agreement between Jordan, Syria and Lebanon.
  • Lebanon:
    – Electricity agreement: Jordan, Syria and Lebanon reached the final draft for the agreement transferring electricity from Jordan to Lebanon via Syria. Jordan will sell Lebanon a set quantity of electricity, totaling 150 megawatts during the late night hours, from 12am to 6am daily, and 250 megawatts between 6am and midnight. The price of a kilowatt hour is set at 12 cents, with 11.2 cents going to Jordan for the electricity, and an additional 0.8 cents to Syria for transporting the electricity into Lebanon. The price was negotiated on the basis of a barrel of oil costing $80 per barrel. It is expected that Syria will be paid in-kind, rather than through cash payments, to avoid complications with sanctions. The World Bank helped negotiate the pricing structure between the three countries, and preliminary agreed to finance a total of $200 million during the first year of the agreement.