As the Syrian conflict reaches its 10-year anniversary, the economic consequences of a decade of war have been nothing less than catastrophic. Instability and inflation are likely to remain major problems over next 10 years — and possibly well beyond — but for now they have created a new level of despair in government-held areas.

The Syrian economy has entered its most fragile phase yet and the prospects of a serious recovery remain all but a distant hope as the fiscal challenges confronting the country far outweigh the meagre remedies on offer. The exchange rate of the Syrian pound has skyrocketed to an estimated 4,250 SYP to the U.S. dollar — a more than eighty-fold rise from the pre-war rate of 50 SYP to the dollar.

In the face of a worsening economic crisis, Damascus finds itself increasingly cash-strapped and stretched thin, relying on the support of its allies Iran and Russia to stay afloat.

A lethal mix of economic mismanagement, sanctions, an industrial sector devastated by war, and trouble in neighboring Lebanon has fueled the devaluation of the Syrian pound, provoking more internal discontent and rendering salaries worthless. Taken together, these issues have only worsened an already severe economic crisis. 

Currency volatility shows no sign of fading  

A rapid rise in inflation over the month of February and into March has given Syrians no economic reprieve. The situation grows worse by the day, with some Syrians waking up in the morning to find their already small salaries have shrunk by another 10% overnight. 

The average government salary in Syria stands at 50,000 SYP per month, yet in the current economic climate this is barely enough to afford one meal at a restaurant or buy groceries to last a few days. Amid high prices and an increasing cost of living, Syrians are under attack economically and there is no relief in sight.

Renowned actor Ghassan Masoud — best known for playing the Muslim ruler Saladin in Ridley Scott's 2005 film “Kingdom of Heaven” — didn’t hold back when discussing the situation in regime-held Syria. He noted with frustration, “Do not pay a citizen a monthly salary of 50,000 SYP where he needs 800,000 SYP to live with dignity and then ask for political stances of patriotism and slogans." Masoud continued, "I am a vegetarian, but I do not accept that a citizen is not able to eat meat because one kilogram costs 20,000 SYP. … The war of hunger, poverty, and the economy scares me more than the war of cannons.” For a well-respected and generally politically-neutral individual of Masoud’s standing to wade into such matters is uncommon and reflects the dire state of the economy in Syria, where famine is becoming less of a theoretical problem and more of a real one.

In the span of one year the number of people suffering from food insecurity has increased by 4.5 million, with studies estimating that a record 12.4 million people — or roughly 60 percent of the Syrian population — are now food insecure.  

The Syrian pound has become so devalued that some Syrians have even uploaded photos on social media of the wheelbarrows of cash needed to make a major purchase, like buying a car or house. For most Syrians though, even small purchases are increasingly out of reach: A trip to a shisha house for coffee can cost half a month’s salary and the recent spike in prices means a kilogram of lamb meat now goes for 29,000 SYP — an unattainable luxury for those struggling to make ends meet. For a country once considered the “breadbasket” of the region, the fact that everyday items are now so unaffordable reflects the severity of the crisis.

Syrians in regime-controlled areas today are tired of politics, slogans, and sanctions, especially now that things are as difficult as they were during the worst years of the war. While the early years of the conflict were marked by violence and a fight to stay alive, the situation today is characterized by empty wallets, hunger, and a struggle for survival by any means necessary. Popular discontent is growing, with one social media user noting that, “The amount of depression and negative energy in the atmosphere in the country is beyond description.”  

In a similar vein, writer Maxim Mansour sarcastically advised his fellow citizens to be careful when dealing with foreign currency rumors: “You must stop listening to the rumors hatched from outside. We have enough local rumors, so in this regard you should support the national product [of rumors].”His comment came as Syrians were glued to their screens watching the lira plummet, but the sentiment rings true more broadly as well. Gas and bread queues are now a part of daily life and petrol is often a luxury, in terms of both price and availability, depending on the week.

Syrian reporter Njood Yousef has argued that the country’s main problems are due to the lack of electricity to fuel industries that are still operating, despite the war. “The mother of the problems in Syria is electricity; no electricity, no industry, and no production. This leads to no provision of materials and no exports, which leaves no strength in the lira.” Most Syrians in residential areas experience power cuts of at least 12 hours per day, and in more remote locations and suburbs the blackouts can last far longer.    

The worsening economic crisis in government-controlled Syria has created a string of additional problems, with the lack of job prospects resulting in a rise in negative sentiment.

Two recent cases have provided stark examples of the growing discontent. The first is that of a young university graduate named Alaa, from al-Diwaniyah in Damascus, who wore his graduation robes while working as shoe-shiner on the streets of the capital. The second case is that of Hussein Shammas, a talented 18-year-old photographer living in Damascus. Facing crushing pressure over his lack of prospects and mocked for his looks, he tragically committed suicide. Both stories have been frequently cited within Syria, especially as the quality of life continues to deteriorate.

Ineffective counter-measures

Syria’s most recent economic crisis started in October 2019, around the same time as the protest movement and subsequent troubles in Lebanon began. President Bashar al-Assad has even argued that savings tied up in Lebanese banks are the primary cause for the economic crisis. He noted that the value of Syrian deposits stranded in Lebanese banks, blocked from being withdrawn by capital controls, was estimated at between $20 billion and $42 billion.

While financial hardship in Lebanon has damaged what was left of the Syrian economy and triggered the current currency devaluation, domestic economic mismanagement, profiteering, and sanctions have had a far greater impact overall. These factors have created a major disparity between the small elite ruling class and the rest of the population that actually has to endure the harsh and ever-worsening financial difficulties.  

For instance, one of the top anti-corruption Facebook pages in the country called out the unjust sale of real estate in rigged auctions, involving conspiracies between lawyers and politicians like Samer al-Dibs of the Damascus Chamber of Commerce, that have enabled property to be acquired at ultra-low prices for personal gain or that of friends and family. Such schemes have given rise to growing anger, even among pro-government and loyalist communities.

While sanctions do play a significant role in restricting economic flows and purchasing ability, they are more of a contributing factor in the current crisis rather than a key driver of the pound’s devaluation. Syria has been under heavy sanctions since the start of the conflict, yet the impact was far less severe during the worst periods of fighting.  

However, so far the government’s main reaction to inflation has been to rely on the security forces cracking down on illegal dollar traders. For instance, the Criminal Security Department arrested three people for “dealing with currency other than the Syrian lira” and seized the large sums of money in their possession. While such measures can temporarily halt the rise in inflation, they do not constitute a viable long-term solution. Along the same lines, a mid-February statement from the Central Bank of Syria (CBS) referred to a set of new coordinated measures to intervene in the foreign exchange market by arresting anyone dealing in dollars. In Damascus, Hama, and Aleppo dozens of individuals have been taken into custody and their money confiscated despite the fact that dealing in dollars is necessary for anyone who needs to make a medium-sized or large transaction.

In late February the minister of finance and the CBS agreed to create a mechanism to provide easy loans for people with limited income to help them cope with the economic crisis. However, the terms required several guarantors and the sums involved were so small that they were quickly spent. Syrian activist Amjad Badran expressed skepticism about the idea in a Facebook post: “The loan is paid out by a million Syrian pounds and that does not help anything. Rather, it is a crisis for the employee. If he withdraws it, a million is the family’s need in a month, so how will the employee pay his installments for years?”

As the crisis drags on, it remains to be seen whether anything can be done to halt the fall of the Syrian pound. The government’s ability to take more drastic action is severely constrained by its straitened finances. Its projected budget for 2021 is just $2.9 billion, down sharply from 2020, when it stood at $9 billion. This is partly due to the huge currency devaluation over the past year, suggesting that any green shoots of economic recovery are likely still a long ways off.

According to World Vision, the economic cost of conflict in Syria after 10 years is estimated to be over $1.2 trillion. Even if the war ended today, its cost will continue to accumulate to the tune of an additional $1.7 trillion in today’s money through to 2035. 

Over-reliance on allies?

Iranian economic support and involvement has steadily increased since the beginning of the October 2019 crisis in Syria. The timing of this assistance has been deliberate and strategic, designed to highlight Iran’s growing outreach as Syria’s economic woes have worsened. Iran’s overall economic expenditure in Syria is valued at around $20-30 billion, according to Heshmatollah Falahatpisheh, an Iranian member of parliament and former chairman of its National Security and Foreign Policy Commission.

One example of Iran’s growing involvement is the establishment of a new Iranian Center for Innovation and Technology in Damascus. Through the center, which opened in February, Iran will extend a line of up to $10 million to support the import of technology to Syria, mainly in the medical field.

Tehran also announced the launch of a direct shipping line from the southern Iranian port city of Bandar Abbas to Lattakia in February. Cargo ships are set to carry freight once per month, starting in March, and the frequency will be increased to twice a month if there is sufficient demand.

To further boost trade, a joint Syrian-Iranian conference was held in Tehran that sought to zero the 4% tariff on Iran's exports to Syria. The head of Iran’s Trade Promotion Organization (TPO), Hamid Zadboom, and the head of the Iran-Syria Joint Chamber of Commerce, Keyvan Kashefi, chaired the conference. Kashefi said a plan was put forward to remove all existing restrictions on exports to Syria. According to the director-general of the TPO’s Office of Arabian and African Countries, Farzad Piltan, there is the capacity for a potential $1.5 billion increase in trade between the two countries.

Iran promised to help Assad offset the impact of the U.S. Caesar sanctions and the economic crisis, and it has followed through, at least in a limited way. In mid-February Ali Asghar Khaji, senior assistant to the Iranian foreign minister, visited Damascus to discuss ways of providing additional support.

This increased flurry of activity has not just been led by Iran, however; Russia, too, has a vested interest in preventing an economic collapse in Syria. Although its assistance to date has been quite minimal, Moscow is helping to keep things barely ticking over in Damascus by providing small supplies of wheat and oil.  

Syria’s ambassador to Russia, Riad Haddad, has pointed to Moscow’s potential reconstruction assistance, confirming that Russian companies have in fact started reconstruction projects that “will reflect positively on the general economic situation in Syria.” In an interview with the pro-government newspaper al-Watan, he added that imports of necessities like oil and wheat from Russia that were crucial to meet the needs of a sizeable share of the population will continue to arrive for the months of March and April as scheduled.

The regime’s over-reliance on Russia and Iran is understandable given the dire economic situation, but ultimately more pro-active steps will be needed to stop the economic free-fall, boost self-sufficiency, and ease the continued reliance on Tehran and Moscow. However temporary these alliances are, such reliance will inevitably lead to higher costs down the line.   

What’s next?

Syria’s economic problems have been accumulating for years now, but as the currency continues its swift deterioration, the options to halt the Syrian pound’s decline and shore up the battered economy grow fewer with every passing day.

As the economy continues its downward spiral and the international stalemate on Syria shows no sign of easing, the situation in government-held areas will continue to get worse, driving home the point that the war of hunger can be just as scary as the war of cannons.


Danny Makki is a journalist covering the Syrian conflict. He has an M.A. in Middle East politics from SOAS University, and specializes in Syrian relations with Russia and Iran. The views expressed in this article are his own. 

Photo by Xinhua/Ammar Safarjalani via Getty Images

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