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The new government aims to retrieve $400 million in frozen assets for reforms
Published : 06 Jan 2025, 11:20 PM
Syria's economy has been decimated by more than a decade of civil war and sanctions that have severed it from the global financial system.
Below is a round up of the current state of the economy and how the conflict has reshaped trade and government finances.
WHAT IS THE STATE OF SYRIA'S ECONOMY?
The economy more than halved between 2010 and 2021, official Syrian data cited by the World Bank in spring 2024 showed. However, this was likely an underestimate, the bank said. Its calculations using nighttime light emissions - a proxy for overall economic activity - indicated a sharper 84 percent contraction between 2010 and 2023.
The World Bank reclassified Syria as a low-income country in 2018. More than 90 percent of the 23 million Syrians live below the poverty line, according to UN agencies.
World Bank data estimated Syria's economy was $23.63 billion in 2022 - roughly on par with Albania and Armenia, which each have fewer than three million inhabitants.
WHAT'S HAPPENED TO SYRIA'S CURRENCY?
Syria's economic crunch worsened in 2019 when neighbouring Lebanon, with which it has extensive economic and financial ties, descended into crisis. Syria then introduced a plethora of exchange rates for different transactions to safeguard access to scarce hard currency.
Following the new rulers' takeover in December, the central bank pledged to adopt an official unified exchange rate.
Central bank data on Monday showed the official rate at 13,065. That compares to a rate of around 47 to the dollar in March 2011 - as civil war engulfed the country, LSEG data showed. SYP=
FX tracking website from Karam Shaar Advisory showed that black market rates soared to 22,000 around Assad's fall, but on Monday stood at 12,800.
The new government appointed Maysaa Sabrine as governor of the central bank on Sunday - the first woman at the helm in its more than 70-year history.
WHAT ARE CURRENT CENTRAL BANK RESERVES?
The new rulers are working to determine what is left in state coffers.
Caretaker Prime Minister Mohammad al-Bashir said FX reserves were very low. Sources told Reuters there are roughly $200 million left in central bank vaults, plus 26 tonnes of gold, worth $2.2 billion at current market prices.
That is significantly below the $18.5 billion in reserves estimated by the IMF in 2010 and the three months' import-cover deemed a minimum safe threshold.
Western governments have frozen hundreds of millions of dollars in Syrian assets since the war began, but the exact size and location of these are unclear.
Switzerland's government said some 99 million Swiss francs ($112 million) worth of frozen Syrian assets are currently in the country. The Syria Report newsletter estimated in April that £163.2 million ($205.76 million) of frozen assets were in the UK.
Despite the central bank sanctions, Western governments allowed Syria to use frozen funds for humanitarian purposes, such as medicine and food.
The new government has said it expects to retrieve up to $400 million in frozen assets abroad to help fund some reforms, including salary increases of 400 percent for some public sector employees next month.
HOW HAVE WAR AND SANCTIONS AFFECTED TRADE AND THE ECONOMY?
Dwindling oil and tourism revenues decimated Syria's exports from $18.4 billion in 2010 to $1.8 billion in 2021, according to the World Bank. Imports also fell, but by a smaller margin - from $22.7 billion to $6.5 billion due to reliance on imported fuel and food.
The widening gap pressured government finances, prompting it to pay for some imports with illicit cash from sales of an addictive amphetamine-like stimulant commonly known as captagon, or from fuel smuggling, experts said.
Captagon production has become the most valuable economic sector, according to the World Bank, which estimates the total market value of the drug originating from Syria as high as $5.6 billion.
WHAT ARE THE ENERGY CHALLENGES?
In 2010, Syria exported 380,000 barrels per day (bpd) of oil. This source of hard-currency revenue evaporated after the conflict began in 2011. Various factions - including Islamic State and Kurdish fighters - seized oilfields, while the latter signed deals with US companies. Sanctions made legitimate exports difficult.
The loss left Syria reliant on energy imports - mostly from allies Russia and Iran. Rachel Ziemba, senior adviser on sanctions with risk consultancy Horizon Engage, said the roughly 1-3 million barrels of fuel per month Syria had been getting from Iran stopped in late December as Tehran pulled back.
She added that lack of access to global banking, due to sanctions and the designation of leading rebel group Hayat Tahrir al-Sham (HTS) as a terrorist organisation, complicates commercial fuel purchases.
HOW HAS AGRICULTURE SUFFERED?
Conflict and drought reduced the number of farmers, damaged irrigation and cut access to seeds and fertilisers.
Agricultural production sank to record lows in 2021 and 2022, with wheat alone falling to a quarter of the around four million tonnes per year pre-war.
Syria imported around one million tonnes of cereal annually from Russia, but flows stopped after the new rulers took control. Ukraine has signalled willingness to supply, but it is unclear how Syria could pay.
