A teller counts US dollars at a commercial bank affiliated with the central bank in Damascus, December 16, 2024. Photo: Louai Beshara/AFP.
By Ward Kasouha – March 21, 2025
The new Syrian regime’s preconceived notion about the economy, which entails ending the socialist model of governance in favor of what it calls the “free economy,” reveals what we can expect from it in terms of “planned reforms.”
It started by suspending customs duties on imported goods. This measure, which sought to provide the largest possible quantity of goods to Syrians, appeared not only as an attempt to gain economic legitimacy from the people but also as a preference between two approaches to supporting industry: favoring foreign over domestic production.
The significant collapse in the prices of these goods, due to their arrival in the Syrian market at cost price, came at the expense of their domestically produced counterparts. Syrian goods appeared unable to compete with goods imported from abroad, especially Turkish ones, due to the continued high cost of domestic production.
In the political economy of commodities, purchasing power stemming from suspended customs duties does not necessarily indicate a positive trend. This is because demand in this case is not driven by wage increases but rather results from facilitated trade processes that disadvantage domestically produced goods. While easier access to foreign goods may appear beneficial, it requires a corresponding internal economic structure to balance the effects of suspended customs duties. This means not only ensuring that local goods are equally accessible, but more importantly, developing a production infrastructure that enables domestic products to remain competitive and withstand the currently unequal competition with foreign imports.
The ambiguities of economic liberalization
Nevertheless, there is a tangible positive aspect of reducing customs duties that must be acknowledged. By eliminating these duties, manufacturers can obtain raw materials from abroad at lower costs, which reduces production costs for local industrialists. This benefit is immediately reflected in market prices, making products more affordable. This aligns, to some extent, with the current decrease in purchasing power resulting from widespread layoffs and the persistent delays in salary payments amid the Syrian pound liquidity crisis.
A contradiction certainly exists between decreasing inflation rates and weak demand for goods and services. However, this paradox is considered “natural” within the context of the structural economic transformation that the country is experiencing. The decline in prices and exchange rates does not stimulate production processes so much as it signals fundamental changes in supply and demand structures—both for commodities and currency—extending even to labor market dynamics following significant reductions in public sector employment.
Regarding Syrian pound liquidity, the difference from its market structure under the previous government is just as radical as the changes in employment, marking a decisive shift from a policy of facilitation to one of tightening.
This shift explains why the official exchange rate remains higher than its market counterpart—contrary to standard monetary practices even in peripheral market economies. It also explains the continuous fluctuation in exchange rates between 10,000 and 12,000, rather than remaining stable at 14,700 as it did for years under the previous administration.
It is crucial to understand the role played by the large gap between official and market exchange rates. This disparity not only keeps prices of goods and services artificially low but also diverts liquidity away from traders and the black market for foreign currency. By maintaining this difference, the central bank can control market liquidity, as demand for goods and services remains suppressed due to insufficient Syrian pound circulation. Simultaneously, this approach compensates for the treasury’s foreign currency shortage, as all foreign currency, whether saved or arriving through external transfers, flows to licensed exchange companies and banks that apply the official exchange rate.
The choice of austerity and setting ceilings for withdrawing liquidity
Overall, these policies—particularly the printing of money and restriction of local currency liquidity—represent a clear shift toward austerity measures unprecedented in Syria’s contemporary history, even predating the Ba’ath Party’s rise to power in 1963. However, the “monetary compulsion” to restrict local currency liquidity due to the treasury’s shortage of both domestic and foreign cash does not justify the implementation of other austerity policies affecting state-provided production sectors and services. The resulting economic landscape appears increasingly characterized by contradictory hybrid approaches.
The central bank’s stated goal of reducing new banknote printing—justified as necessary to maintain a high Syrian pound exchange rate and control inflation—is paired with parallel measures to reduce the workforce in public institutions and factories. This approach positions currency stabilization and inflation control outside the context of benefiting the majority of Syrians. Rather than enhancing employment opportunities, jobs are being cut; instead of increasing consumer liquidity, funds are being indirectly withdrawn under the pretext of a liquidity crisis. Notably, this crisis was partially alleviated recently through cash delivered by Russia, fulfilling a contract established with the previous administration.
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Between quantitative easing and austerity
The previous government operated under the contrary approach, largely due to its continued reliance on remnants of socialist structures. Though these structures had significantly deteriorated, they remained effective in supporting Syria’s most vulnerable populations. The monetary policy of that era maintained high market liquidity through continuous currency printing abroad, even without adequate gold reserves to back it.
This approach kept the Syrian pound circulating among traders, producers, employees, and workers, despite declining demand for goods and services caused by record inflation and steadily rising exchange rates. Simultaneously, the Al-Assad administration preserved the large public sector workforce, as its quantitative easing policy complemented efforts to maintain support for the working and middle classes.
However, this strategy proved insufficient to bolster demand for goods and products. Continuous currency printing fueled inflation rather than controlling it, which in turn suppressed demand and limited the actual benefit that working and middle classes received from wages and salaries. The current contractionary policy has dismantled this entire system. Beyond merely reversing monetary policy by reducing liquidity and imposing withdrawal limits at banks, it fundamentally reorients the economy toward a significantly reduced public sector workforce. This shift has already resulted in tens of thousands of workers and employees losing their jobs.
Conclusion
The widespread adoption of monetary tightening policies—characterized as austerity—is reshaping the Syrian economy. This approach includes eliminating subsidies on essential goods and subjecting them solely to market forces. Such measures signal more than just an embrace of a peripheral, dependent form of capitalism that fails to generate true economic accumulation. They represent a deliberate strategy to dismantle the remaining socialist structures inherited from the previous era—structures that, despite their deterioration and eventual capture by the oligarchy that dominated the final phase of Bashar al-Assad’s rule, still provided critical support.
The current economic orientation does not primarily oppose the previous government, which itself had transformed into an oligarchic system. Rather, it represents a regression from the few remaining achievements of the socialist period. These achievements did not benefit the wealthy elite or the oligarchic minority that persists across changing regimes and governments. Instead, they supported the marginalized, the impoverished, day laborers, and wage workers—groups that constitute the overwhelming majority of Syrians, whether they previously supported the government or aligned with the regime that has now assumed power.
Translation: Orinoco Tribune
OT/DZ/SC
