The high rate of inflation is one of the economic scourges, the effects of which are greatly reflected in social reality, and unless serious policies are adopted to combat this phenomenon, many negative phenomena will appear, including loss of confidence in the local currency, keeping foreign currencies or gold, or keeping savings in… Asset purchase.
Conflict areas are highly susceptible to the emergence of the problem of inflation, and Syria was one of these areas, especially since it witnessed an armed conflict over the course of 13 years, and the economy deteriorated significantly, and inflation rates were estimated at about 135% by the end of 2023, and expectations were that it would reach By the end of 2024, it will reach 85%, according to the figures of the Investment Guarantee Bulletin issued by the Arab Corporation for Investment and Export Credit Guarantee for the period October – December 2024.
Among several reasons, most notably the high inflation rates, poverty rates in Syria increased during the reign of ousted President Bashar al-Assad to nearly 90% of the Syrian people.
A new reality
After December 8, 2024, the fall of the Assad regime, and the success of the Syrian revolution in controlling the majority of Syrian territory, new manifestations began on the economic level, although things have not yet fully stabilized on the political and security level.
In the first days of the revolutionaries taking over the administration of the country on the economic level, indicators appeared indicating the possibility of economic improvement in general, and a decline in inflation rates in particular. Among these indicators is that the price of the Syrian pound witnessed a noticeable improvement against foreign currencies, reaching 12 thousand pounds to the dollar when purchasing and 12. 5 thousand liras upon sale.
According to the exchange rates announced by the Central Bank of Syria, the dollar has risen against the lira again, although not in an exaggerated manner, as was the case when the previous regime took control.
This, in turn, was reflected in the prices of goods and services in Syria, as the prices of goods decreased, especially in the capital, Damascus, according to what some media outlets or social media bloggers reported.
Factors for declining inflation
We must take into account that the first days after the success of the Syrian revolution may give us numbers that will undoubtedly be subject to reconsideration.
But the real performance will appear during the coming period, after the nature of the management of the economy becomes clear, whether with regard to the country’s economic identity, the launch of economic activity for reconstruction, the return of work and production, the extent of the country’s dependence on abroad, and most importantly the legislative structure regulating economic activity.
This is in addition to activating the internal capabilities of economic activity, so that local goods and services increase, and imports of what are important and necessary decrease, but among the elements through which we can expect a decline in inflation in Syria during the next stage, are the following:
- Decisions to restore economic activity, and the return of government institutions related to economic aspects, the most important of which was the return of the Central Bank to practice its activity, as well as the rest of the components of the banking system, and the ministries concerned with economic activity.
- Reassuring individuals of their savings in banks and that settlements for importers with the government during the control of the previous regime will be refunded, and working according to a new import system in which importers deal with the foreign market directly, which means providing evidence by the interim government to restore confidence between the people and the government regarding the situation. Economic.
- The announcement that the approved currency in the new Syria would be the Syrian pound had a positive impact in alleviating the artificial demand for foreign currencies, which is one of the reasons for the improvement in the local currency exchange rate.
- The ease of movement within a large part of Syria contributed to the speed and possibility of transporting goods, and thus providing them in the required quantities, which enhances the absence of a shortage in supply, which helps to have real prices far from the state of distortion resulting from monopoly.
- The flow of goods from neighboring countries. The flow of goods from the Turkish side did not stop, after the fall of Assad, but rather increased, and what is new is the Jordanian authorities’ announcement of the return of the operation of the Al-Jaber crossing for the flow of goods and travelers from Jordan to Syria on December 18, 2024.
- The cost of goods and services decreased in the Syrian market, as merchants and producers incurred an additional cost on goods and services, as a result of the imposition of royalties by the former regime, the shabiha, or corruption professionals.
- The exchange rate of the lira against the dollar has improved significantly compared to what it was before the fall of Assad, which means an increase in the purchasing power of the local currency.
In light of the return movement of Syrian migrants, it is expected that foreign exchange flows to Syria will increase, especially remittances from Syrian workers abroad, in order to provide a decent life for their families, which means an increase in the supply of foreign exchange, and thus either a state of stability for the current exchange rate, or further improvement of the situation. The lira against foreign currencies, and in both cases inflation will be at acceptable rates. - Combating corruption in the customs institution, to eliminate the phenomenon of bribery, and on the other hand not to obstruct the flow of imported goods. In the end, the merchant bears any cost on the consumer, and it is expected that this matter will be considered by the interim government, and the government’s promise to study increasing salaries will help to achieve this matter. For government employees.
- The flow of humanitarian aid to Syria during the coming period, and it has a role in providing some goods, which could contribute to a decline in local demand to some extent, which means controlling inflation rates at lower limits than they were before.
However, this requires good management of this assistance and diligence as much as possible to reach the needy, the marginalized and those affected by the repercussions of the past period.
Concerns and warnings
Managing monetary policy to combat inflation – even if it is managed by the central bank – requires coordination between all components of economic policy: financial, monetary, trade, employment, and investment.
There are fears that must be taken into account, in order for the anti-inflation policy maker to have a great opportunity, so that inflation does not return at frightening rates in the new Syria, but rather it is at acceptable rates, consisting of single digits, and on top of these fears, is that the import area expands. From abroad, for everything, the cost of importing becomes a burden on the country’s limited foreign exchange resources, which facilitates an increase in demand for foreign exchange, and thus a decrease in the value of the local currency, and the disgusting snake of inflation appears before us, and there is a possibility that the country will come in the field of… Inflation due to what is known as imported inflation.
Recently, Commander Ahmed Al-Sharaa stated that they were considering increasing salaries by 400%, although caretaker Prime Minister Mohamed Al-Bashir had spoken of a lower percentage than that, at 300%.
Whatever the case, increasing salaries without real resources will undoubtedly lead to an increase in inflation rates, especially since the financial situation of the new Syrian government is murky and in crisis, as a result of the extremely bad financial situation left behind by the fugitive Bashar al-Assad.
In any case, the inflation rate by the end of 2024 will likely be slightly lower than estimated, due to the improvement witnessed in the last days of December 2024.
However, measuring inflation rates by the end of January 2025 will give us more positive results regarding the inflation rate, so that it will be much lower when compared to January 2024, or December 2025, if the interim government continues to deal positively with the country’s economic scene. .
