Enab Baladi – Jana al-Issa
Without prior preparation and following the weekly periodic meeting of the Syrian government, the government asked all citizens holding the smart card to open bank accounts within three months.
The government explained on June 27 that its request relates to preparing for the transfer of support amounts to these accounts later when the cash support system is completed and ready to serve the file suitably, without specifying the period in which this support will begin to be distributed.
It considered that the requirement to open bank accounts within three months for smart cardholders does not mean any change in the policy of providing support or the disruption of delivering it to its rightful recipients. Instead, it concerns enabling citizens to receive their full entitlements from the support and preventing any encroachment on these entitlements from existing or potential intermediary entities, without specifying them.
Although the talk of converting support to cash was previously met with governmental justifications for the inability to do so, the government hinted recently at the seriousness of its proposal.
Government movements indicate that the matter is only subject to procedures that started to be implemented days after the decision. The Central Bank of Syria asked private banks to increase working hours and work on Saturdays, limiting operations during the additional working hours to opening bank accounts only and what is required to activate the opened account, including activating dormant accounts, if any, without conducting any other operations under the threat of accountability.
The current governmental orientation opens the door to questions about the ability to convert support to cash and its goals, as well as the impact of implementing this approach on citizens and subsidized goods alike.
Control through banking
Syrian political economist Ibrahim Yassin told Enab Baladi that the Syrian regime, by converting support to cash amounts, is trying to shift from socialism to economic liberalism and social market economy, as labeled by the head of regime, Bashar al-Assad, amid unclear economic definitions in Syria.
A market economy or free economy or capitalist economic system is one that allows individuals to engage in any economic activity they want, and to establish any project, along with the freedom of contracting between individuals and institutions without the state’s intervention. Meaning the government leaves the market to self-regulate without interference in economic activities.
The existence of a free market economy does not mean the absence of the state and the public sector in organizing economic life within society. Because a free economy could lead to monopolies by some institutions and individuals through product monopolization, the idea of a social economy emerged. It balances between capitalist and socialist economies, aiming to achieve equality among citizens, granting middle and lower classes their rights.
A free economy policy is based on liberating the economy and linking prices to supply and demand of goods, without state interference as in the centralized socialist system.
Yassin believes the issue of transitioning to cash support is very complex due to the presence of many supported sectors like foodstuffs, oil derivatives, education, and healthcare, thus requiring a gradual lifting of support.
Regarding the shift towards cash support, Yassin thinks the regime seeks to control the financial mass in the market and therefore has greater control over the exchange rate, despite the banking sector’s unpreparedness amid frequent power outages, crowding, and lack of electricity and fuel supplies.
Dr. Karam Shaar, director of the Syrian Program at the Observatory of Political and Economic Networks, told Enab Baladi that the regime’s government’s move towards cash support is correct if applied properly.
Commodity support systems involve significant financial waste as they are prone to looting, which is why most developed countries employ cash support systems with minimal exceptions for certain subsidized goods.
By converting support to cash, the government aims to reduce the scale of looting associated with commodity support, ensure everyone deposits in the banking system making tax work easier, an effort led by the Ministry of Finance for several years to track individual and company accounts, thus reducing tax evasion rates.
The government also aims to alleviate the state budget deficit by reducing financial waste.
The state’s budget deficit for the current fiscal year amounts to 9,404 billion pounds.
Increased inflation and goods prices
Pumping a large sum of money will increase inflation and depositing amounts in non-withdrawable bank accounts will open new doors for corruption. In both cases, the regime’s government experiments without often relying on economists who study the market capabilities and consider other countries’ experiences, according to researcher Ibrahim Yassin.
Yassin outlines that price liberalization would gradually raise prices to cost plus profit, but the effect would extend to all market goods. If support is completely lifted, it would necessitate canceling taxes and raising wages in both public and private sectors.
Dr. Karam Shaar believes the government might currently be able to determine the cash support amount allocated to each family, covering the needs of an average-income family from support.
He confirmed that later, it would be easier for the government to reduce cash support, as reducing support for goods is more complicated due to their linkage with supply chains and several parties in both private and public sectors.
However, after initiating cash support, this amount will be affected by inflation and erode over time, without any government action then, as it would have completely lifted its hand from the support directed to citizens and abandoned them.
16.7 Million Syrians need assistance
In Syria, 16.7 million people need humanitarian assistance, a 9% increase from 2023, according to estimates by the UNHCR.
Around 80% of the Syrian population will require some form of humanitarian assistance in 2024, according to a February 12th report from the World Food Programme (WFP) regarding the number of food-insecure people in Syria.
Approximately 55% of the population or 12.9 million people in Syria suffer from food insecurity, with 3.1 million severely food insecure.
When did government support start in Syria?
A study published by the Arab Center for Research and Policy Studies in March 2022 revealed that Syria adopted a socialist approach in managing its political and economic affairs since 1936, a system based on state ownership of production means and economic cooperation.
With Hafez al-Assad’s rise to power in 1970, restrictions on individual projects and the private sector were somewhat eased, yet this did not significantly activate the economic cycle in the country due to corruption and persistent structural disincentives for investment.
In the 1980s, Syria found itself politically isolated and amidst a severe economic crisis. The study notes that the per capita real GDP decreased by 22% between 1982 and 1989. Extensive nationalization of factories, land, and enterprises led to a significant capital flight, while a governmental capitalist class emerged, benefiting from corruption and lack of economic freedoms to accumulate large fortunes.
These factors deteriorated the living conditions and increased poverty and unemployment rates, especially among youth, while industrial and agricultural sectors declined, reducing their contribution to the GDP to unprecedented levels.
Following the Cold War’s end and the cessation of foreign aid, the Syrian government implemented a series of economic reforms starting in 1990, under which the Syrian economy witnessed strong growth throughout the 1990s. This resulted in the doubling of the per capita GDP during the period from 2000 to 2010, with the average Syrian’s income rising from about 1200 USD in 2000 to around 2800 USD in 2010.
The mismanagement of the crisis following the Syrian revolution’s onset in 2011 inflicted significant losses on the Syrian economy, estimated by the UN ESCWA at approximately 442 billion USD by the end of 2020.
The study identified key causes of the current economic crisis in regime-controlled areas, exacerbated by the COVID-19 pandemic:
- Mobilizing all state resources for the military machine.
- Wide-scale, systematic destruction of infrastructure and populations.
- Losing control of many trade crossings that contribute to the state budget.
- Disruption of industrial and commercial movements, halting production.
- Decline in import and export levels.
- Emigration of skilled labor, human capital, and investment.
- International sanctions imposed on the Syrian economy.
- Decreased oil production with Syrian Democratic Forces controlling major fields.
- Draining foreign currency reserves and increasing public debt.
- Total collapse of the tourism sector due to security concerns.
- Global economic downturn prompted by COVID-19.