Syria’s dire economic woes threaten to undermine its new government

DAMASCUS, Syria – Two months after Syrian President Bashar Assad fled, some of the only houses with round-the-clock electricity here are those that share a power grid with the notorious security agencies that once propped up his rule.

Thirteen years of civil war have left Syria’s economy in ruins. Public services are on their knees and, in some cases, in worse shape now than before Assad’s fall. His Iranian backers have suspended oil supplies that had allowed for the production of more electricity. Now, large parts of the capital go dark when the sun sets.

The country’s interim president, Ahmed al-Sharaa – formerly known by his nom de guerre, Abu Mohammed al-Jolani – faces a daunting task, experts say. To secure his rule and stave off another political crisis, his caretaker government needs to rapidly increase energy production to placate an anxious public, but the government’s coffers are bare. Economic progress requires support from the outside world but, instead, risks being strangled by Western sanctions that have isolated Syria from the global economy.

The United States and the European Union say they are awaiting evidence that Syria’s new rulers will prioritize democratic norms and inclusion of minorities before lifting all of the restrictions, which initially targeted the Assad regime. Sharaa has long been the leader of Hay’at Tahrir al-Sham, or HTS, which was once an affiliate of al-Qaeda. Although his group severed ties in 2016 and put a more moderate face on its rule in northwest Syria, the U.S. and E.U. governments still list HTS as a terrorist group.

Washington has lifted some sanctions since Assad’s fall, hoping to ease the entry of humanitarian aid, but significant restrictions remain on the banking sector. Sanctions experts say financial institutions and private individuals will be afraid of dealing with Syrians until all of the restrictions are lifted.

Syria’s economy contracted by 85% during the civil war, according to the World Bank. More than 80% of Syrians now live in poverty. Before the war, the Syrian pound traded at 47 to the dollar. On the eve of the regime’s collapse, the rate was 14,000. The monthly salary of a doctor, for example, plunged to the equivalent of about $25 – in local currency, a stack of bank notes inches thick.

The government’s short-term strategy is simply survival, said Jihad Yazigi, founder and editor of the Syria Report, an online bulletin covering Syrian economic affairs. “Secure funding, secure energy and secure wheat supplies: These are going to be really key for the government to avoid a serious crisis in the next few weeks or months.”

Two months after the collapse of the Assad regime, relief remains palpable in Damascus. The former president’s face has been scratched from propaganda posters throughout the city. His prisons have been emptied, and families can finally search openly for missing loved ones whose arrests they once feared to even mention in public. But the pressures on ordinary Syrians are intense.

“Where do you even start?” said Omar Kannat, 24, clutching a cellphone that kept pinging with updates, questions and concerns from friends across the country. “The price of food, the unemployment problems, the questions about what really happened to the prisoners,” he said. “We have so many hopes and fears that it’s hard to know how to feel right now.”

During three weeks of interviews in the cities of Damascus, Aleppo and Hama, nearly everyone said their primary concern was economic.

Initial steps

In early January, the new finance minister, Mohammed Abazeed, said the government would increase salaries for many public-sector employees by up to 400%, though progress toward keeping that promise remains unclear.

But the ban on foreign currency has been lifted and customs fees have been unified, prompting U.S. dollars to flood the market and imported fruit and vegetables to force down the prices of staples.

Under Assad, simply possessing dollars was often viewed by security agents as evidence of involvement in a foreign conspiracy against the government, and reporters found photocopies of American bank notes in dozens of case files inside Damascus intelligence branches where thousands of Syrians were tortured and killed. This week, makeshift money changers were seeking business out in the open, with milkshake shops, hotel concierges and newly opened offices all competing for the exchange business.

“It’s a relief to just hold them,” Ahmed Ibrahim, a 28-year-old civil servant, said as he rubbed a $100 bill from his savings between thumb and forefinger. “It’s not just a bank note, it’s security,” he said. “It’s a sign of stability that makes me think things might get better, not worse.”

More challenging for Sharaa and his interim government will be how to address a bloated public sector. Under Assad, mismanagement and corruption produced payrolls padded with overstaffing and even “ghost employees,” who took salaries but did not work. An initial assessment by the interim government found that the payroll included 300,000 people who probably did no work.

Efforts to reduce the public-sector payroll have already stirred protests, with small groups of fired workers congregating outside their former workplaces, demanding answers. On the sidewalk outside the Real Estate Bank in central Damascus on a recent day, demonstrators held signs aloft decrying a decision to cut dozens of employees the week before.

“We’re here so people can see us,” said Majd Hassan, 41, who said he had worked in the bank’s loan department since 2008. “We haven’t been given a reason. We were fired before anyone asked what we even did here.”

As the crowd grew, spilling over the sidewalk and into the road, passersby stopped to challenge them. “Half of those people didn’t even attend their work. They were just there on paper because they had powerful people backing them,” said Shadi Olaba, 48, a businessman who works in the area. Behind him, another man, Ahmed Saad, stopped briefly to agree. “You needed about two people to run that office, and the payroll contained 11,” he said.

“And they always took bribes,” Olaba added. Saad nodded, saying, “We need more decisions like this, not fewer.”

Looking for a vision

So far, the new government has offered little in the way of a political vision. So economic worries and anxiety about the direction Sharaa may take the country are often filling the void. He has already faced criticism among many Syrians for installing a caretaker government whose composition does not reflect the nation’s religious and cultural diversity and for centralizing decision-making in a small circle.

“They needed something quick and they prioritized expediency and familiarity,” said Dareen Khalifa, a senior adviser at the International Crisis Group. “It worked when they were managing a small swath of territory that was very homogenous and conservative, but this is not that.”

Sharaa has said his caretaker cabinet will be a temporary measure, setting a March 1 deadline for some form of transition. “It needs to be an immediate priority to expand from the pool they are drawing from,” Khalifa said.

E.U. officials said last week that such political progress could lead to the lifting of some sanctions. “Right now we have a political decision – we have a road map,” said E.U. foreign policy chief Kaja Kallas. “If we see some steps in the right direction, we’re also willing to ease the next sanctions.”

Economists say the sanctions, which in part are aimed at industrial goods that could be used to harm civilians, have prevented the reconstruction of war-shattered districts, electricity generation and the upgrading of decades-old infrastructure.

Seeking international acceptance, the caretaker government has been publicizing a flood of engagements with foreign representatives, from Sharaa’s meetings with Western officials in Damascus to his trips to Saudi Arabia and Turkey this week. Meanwhile, his own citizens have been left waiting for answers.

“The priority has become communicating with the external powers, rather than a domestic audience,” said Haid Haid, a fellow with the Middle East and North Africa program at Chatham House. “Sharaa gives interviews and explains his vision to the outside world, while people inside have no idea what this group is envisioning, not just for the big questions, but also for the small details.