(Al Jazeera Media Network) When opposition forces ousted Syrian leader Bashar al-Assad in a lightning offensive on December 8, they inherited a crisis-hit economy.
One month later, they are working to restart it, facing the damage of 14 years of war and crippling sanctions that have decimated economic activity.
The Syrian pound’s value has been drained, and inflation reached the triple digits. Last month, an unnamed official told the Reuters news agency that the Central Bank of Syria had just $200 million in foreign exchange reserves. At the end of 2010, it had $17 billion.
The challenges
Having assumed control of Syria’s caretaker government, Hayat Tahrir al-Sham (HTS) – itself still sanctioned as a “terrorist organisation” by the United States and others – faces a long list of challenges.
An immediate priority is funding, including the basics – the World Food Program estimates that 13.1 million Syrians do not have enough to eat – and peace and security.
The caretaker government wants to transition away from the corrupt system that gave Assad loyalists privileged access to government contracts and kept key industries in the hands of the al-Assads.
The regime even played a role in the production of Captagon – an addictive illegal amphetamine used widely in the Gulf states – to raise money.
HTS says it wants to introduce a free-market system and has appointed new Central Bank governor Maysaa Sabrine, the first woman to take the role, as the institution’s governor.
Though details about modernization efforts remain vague, Mohammed Abazeed, the caretaker finance minister, told Reuters the ministries would be restructured to improve efficiency and accountability. Along with outside investment, he said this would lead to a 400% public sector salary increase by February.
He added that an overhaul of the tax system was also in the works. “By the end of this year, we expect [to have] a well-designed tax system that takes the interests of all taxpayers into account,” Abazeed said.
To allay concerns about goods shortages, the transition government has reopened the Nasib border crossing with Jordan – one of Syria’s busiest trading routes. They have also told shops and government ministries to stay open and instructed the state-owned Syrian Petroleum Company to resume supplies.
War and sanctions
Syria is endowed with natural resources, has a strategic position on the Mediterranean Sea, and benefits from a 94% literacy rate, one of the highest in the region.
“Before 2011, Syria’s economy was relatively well-diversified. It wasn’t performing brilliantly, but it was growing,” said Benjamin Feve, a researcher with the Triangle think tank in Lebanon. “It benefited from wheat, phosphate and fuel exports, a small manufacturing base, rising real estate prices and tourism receipts. But the war shattered all that.”
A 2011 uprising against Bashar al-Assad was met with extreme government violence, leading to the deaths of at least half a million people. Millions more have been displaced as physical infrastructure, including roads and farmland, was razed.
Economic indicators nosedived: Syria’s gross domestic product (GDP) shrank by 54% from 2010 to 2021 – 90% of Syrians are now thought to live in poverty. Neighbourhoods devastated by the fighting during the war have largely not been rebuilt, a reminder of the destruction the past 14 years have brought.
Meanwhile, al-Assad’s use of torture chambers and chemical weapons against his own people turned Syria into a pariah state. The US and the European Union inflicted crippling sanctions in 2011, denying Damascus access to capital markets, western aid and commodity revenue.
“There’s little doubt that sanctions hollowed out state institutions and reduced Syria’s economic resilience,” said Feve.
Omar Dahi, a Syrian economics professor at Hampshire College in Massachusetts, said the impact of economic sanctions has been overlooked. “In addition to war-related costs, sanctions drained business activity and shrunk the government’s tax base,” said Dahi.
From 2011 to 2021, he estimated that Syria’s tax revenue to GDP ratio fell from 11 to 5 percent, or just $4.5 billion, in 2021. According to Dahi, that represents one of the lowest tax shares in the world.
For years, Russia and Iran propped up the al-Assad regime, helping it bypass western sanctions. Moscow and Tehran extended lines of credit, permitting Syria to import food and fuel.
In exchange, al-Assad gave up some of Syria’s key resources, like phosphate deposits. He also built up an unknown quantity of debt to his foreign backers, which will need to be repaid. Dahi, however, does not expect that anytime soon.
Resuscitating the economy
With economic recovery in focus, Dahi said it would be “sensible” for HTS to focus on “domestic activities like food and housing… reviving indigenous drivers of growth, particularly agriculture, would provide some security. The government could then try and support basic industries like textiles.”
Still, considering the small size of Syria’s economy, Dahi warned that “long-term growth and development won’t be possible without access to foreign capital and technology.”
Ahmed al-Shara, commander-in-chief of Syria’s new administration, says he hopes US President-elect Donald Trump will lift sanctions. In a sign that the US is willing to engage with Syria’s new leadership, Washington removed a $10 million bounty for al-Shara on December 20.
US officials have also begun talks with Qatar and the United Arab Emirates about relaxing financial restrictions on Damascus, provided the new government cuts ties with Russia and Iran and offers political stability.
But al-Sharaa has also said it will take up to four years for Syria to hold its first elections, an extended transfer of power that could delay the removal of sanctions.
According to Syria’s Ministry of Petroleum and Mineral Resources, losses in the oil sector amounted to $91.5 billion from 2011 to 2021.
Years of civil conflict left the country’s energy infrastructure “well below operating capacity”, and corresponding losses to public finances were “significant”, according to Robert Perkins, an energy analyst at S&P Global.
He highlighted that Syria’s oil and gas fields are mainly under the control of the US-backed Syrian Democratic Forces (SDF) in the northeast.
Owing to the potential size of the hydrocarbon sector, the transfer of these resources back to Damascus will be critical in financing reconstruction efforts – estimated at between $250 billion and $400 billion.
Turkiye could play a key role.
With risk-averse investors unlikely to rush back into Syria, Ankara has indicated it will fill the gap – Turkish businesses have operated in opposition-controlled territory for years, particularly in construction.
Last week, ahead of a trip to Damascus, Turkish Minister of Energy Alparslan Bayraktar said his government wants to carry out studies into how Syria’s natural gas and oil resources could be used for development and reconstruction.
Turkish forces are also present in northwestern Syria, part of its long opposition to the presence along its border of the SDF, which it believes is closely affiliated to the Kurdistan Workers’ Party (PKK), a group that has fought a decades-long war against the Turkish state and is considered a “terrorist” group by Ankara and Washington.
It is therefore likely that Turkiye will be pushing Syria’s new government to reclaim its oil reserves from the SDF. “Clearly, Syria’s energy sector would benefit from large-scale investment in export pipelines and port facilities,” Perkins said of Turkiye’s funding proposals.
But he doubts if investments from Türkiye alone could galvanize near-term growth.
For Perkins, “any serious economic program must begin with an easing of all international sanctions.”
https://www.aljazeera.com/economy/2025/1/8/rebuilding-syrias-economy-can-stability-return-after-war
