U.S. President Donald Trump announced plans to lift longstanding sanctions on Syria that have isolated the country financially since the downfall of former president Bashar al-Assad.
While the European Union and the UK have already eased some sanctions, a complete removal by the U.S. may encourage other nations to follow suit.
The current state of Syria’s economy reflects significant changes brought on by the 14-year civil war, which resulted in Assad’s collapse in December.
State of the Economy
The World Bank estimates Syria’s economy at approximately $21 billion, similar to that of Albania and Armenia.
Data from Syria suggests that the economy has more than doubled in size from 2010 to 2022, though the World Bank suspects this may still be an understatement. Nighttime light emissions, used as an indicator of economic activity, reveal a sharper 83% decline from 2010 to 2024.
In 2018, a United Nations agency categorized Syria as a low-income country, with over 90% of its nearly 25 million citizens living in poverty.
Currency Effects
The economic situation in Syria worsened in 2019 following Lebanon’s financial crisis, leading Damascus to implement multiple exchange rates to stabilize the currency.
With the new government in place, the central bank is now aiming to enforce a unified official exchange rate for the Syrian pound. Notably, Maisa Sablin has been appointed as the new central bank governor, marking the first time a woman has held this position in over 70 years.
As of Wednesday, the exchange rate stood at £11,065 per dollar, a significant drop from the black market rate of approximately 22,000 following Assad’s ousting last year, and starkly contrasted with $47 back in March 2011 when the civil conflict began.
Debt Situation
The government states it is responsible for repaying between $2 billion and $23 billion in bilateral loans, although claims from Iran and Russia could escalate this to between $50 billion and $50 billion.
Experts in sovereign debt caution that these obligations could be classified as “unwelcome” war debt, arguing that they were granted without consideration for the Syrian populace or their needs.
A recent report from the Peterson Institute highlights the various creditors involved in Syria’s debt, from governments and central banks to state-owned enterprises and commercial entities.
Central Bank Status
The central bank reportedly holds only about $200 million in foreign currency reserves, a significant decline from $18.5 billion prior to the civil war. It also possesses 26 tons of gold, currently valued at over $2.6 billion.
The new administration anticipates recovering up to $400 million in frozen assets to fund reforms, including recent increases in public sector salaries. The extent to which these assets can be retrieved from Western governments, frozen under Assad’s regime, remains uncertain.
According to Switzerland, approximately 99 million Swiss francs ($118 million) are currently frozen, while estimates from the Syria Report suggest about £163 million ($217 million) in the UK.
Illegal Transactions
The World Bank reports a sharp decline in Syrian exports, dropping from $18.4 billion in 2010 to just $1.8 billion in 2021, primarily due to decreased oil and tourism revenues.
In response to financial strain, the government has turned to illegal cash flows from the sale of drugs, particularly Captagon, and fuel smuggling, analysts say. Captagon production has emerged as a vital sector, with the market valued at $5.6 billion last year.
Energy Issues
In 2010, Syria exported 380,000 barrels of oil daily, but this income source evaporated after the civil war began in 2011 when various factions seized control of oil fields. Although some fields are currently contracted to U.S. companies, sanctions have limited other legitimate export options.
Consequently, Syria has relied on energy imports, mainly from Russian and Iranian allies. Recently, Iran has reduced its fuel supply, which once reached 10 million barrels per month in late December.
Agricultural Shortfalls
Conflicts and drought have drastically diminished farming, damaged irrigation systems, and limited access to essential seeds and fertilizers. Agricultural output hit record lows, with wheat production falling to a quarter of the usual 4 million tonnes in 2021 and 2022.
Syria imports around 1 million tonnes of grain from Russia annually, but this flow slowed with the change in government, only resuming last month. Ukraine has shown willingness to supply wheat, but it’s unclear how Syria will finance these purchases.
