BEIRUT, Lebanon — Even as the Syrian government makes some gains against
the rebels on the battlefield, it is taking a rout on an equally
important front: the economy.
Two years of war have quintupled
unemployment, reduced the Syrian currency to one-sixth of its prewar
value, cost the public sector $15 billion in losses and damages to
public buildings, slashed personal savings, and shrunk the economy 35
percent, according to government and United Nations officials.
The
pillars of Syria’s economy have crumbled as the war has destroyed
factories, disrupted agriculture, vaporized tourism and slashed oil
revenues, with America and Europe imposing sanctions and rebels taking
over oil fields.
Increasingly isolated in the face of a growing
economic crisis that has reduced foreign currency reserves to about $2
billion to $5 billion from $18 billion, a government that long prided
itself on its low national debt and relative self-sufficiency has now
been forced to rely on new credit lines from its main remaining allies —
Iran, Russia and China — to buy food and fuel.
The government
has a $1 billion credit line with Iran, and borrows $500 million a month
to import oil products delivered on Russian ships, a government
consultant, Mudar Barakat, said in a recent interview in Beirut. Some
analysts believe the government will need even more aid from those
countries to keep paying government workers and a growing roster of
security forces.
Now, some officials hope to push through
measures to tighten state control of the economy, rolling back some of
the modest economic liberalization and support for private business that
President Bashar al-Assad introduced early on, in a departure from his
party’s socialist roots.
“We’re thinking of going back to the way
it was in the 1980s, when the government was buying the main
necessities of daily life,” Mr. Barakat said. “We, as a government, must
cover the daily needs of the people, no matter how much the cost is,
and keep the prices low.”
Syria’s economic problems, in Mr.
Barakat’s view, are rooted in the loosening of state control by
reformers favored early in Mr. Assad’s tenure, who he said “vandalized”
the economy “into this liberalized sort of chaos.”
A faction that
includes Kadri Jamil, a Russian-educated, socialist former professor
who was appointed deputy prime minister in charge of the economy in a
shake-up last year, hopes Syria can weather the storm by raising wages,
tightening price controls on subsidized goods like bread, cracking down
on black-market currency traders and even ceasing government trade in
dollars and euros.
The government, Mr. Barakat said, now signs
new foreign trade deals only in the currencies of friendly countries to
insulate itself from what it sees as an economic conspiracy orchestrated
by its international enemies.
But such measures — met with
ridicule and even defiance by some Syrian businesspeople — will provide
at best short-term relief, economists say.
Even the free-flowing
aid from Iran and other allies inspires little confidence among Syrians,
said an economist in Damascus who asked not to be identified publicly
as criticizing government policies, because it shows the government “has
no means and depends on others to save it.”
A Damascus businessman derided the new policy of doing business in Iranian, Russian and Chinese currencies.
“These
countries themselves do business in dollars and euros,” he said,
adding: “Syria today is not Syria in the 1980s. It is easy to keep the
door closed, but it is hard to close it after it has been open 13 years
and people are used to breathing the fresh air.”
This month, the
government banned food exports and announced a crackdown on black-market
money traders. The value of the Syrian pound plunged to 330 to the
dollar, down from 47 before the war.
On Wednesday, amid a flurry
of panicked dealing, the Central Bank tried and failed to strong-arm
traders into selling the Syrian pound at a higher, preset price. Dealers
said Central Bank officials offered to guarantee a tiny profit if they
would sell the pound at a rate of 250.
The traders refused,
several said. The government, they said, lacks the power to impose its
will, in part because a few wealthy businessmen influence the dollar
rate and corrupt officials profit from the trade.
The next day,
currency exchange shops in the Damascus districts of Hariqa and Marjah
were bustling. Customers clamored to change their savings into foreign
currency — Saudi riyals, Emirati dirhams, anything — and traders shouted
into phones, asking of the dollar, “How much is the green?”
Ammar,
35, a trader who gave only his first name for safety purposes, said the
week’s events showed the government had no clearer plan for the
economic crisis than it did for the political or military ones. “The
government doesn’t understand the main problem or doesn’t want to
understand,” he said. “Syrians no longer trust the Syrian pound.”
Last
week’s currency crash deepened a steady decline that has helped send
prices soaring even for basic foodstuffs and reduced most Syrians’
buying power to a fraction of prewar levels, making it hard even for
once-well-off families to afford meat and fish.
The economic
crisis threatens one of the government’s most crucial selling points.
Syrians have long been envied in neighboring countries — even by the
Lebanese, with far more political freedom — for the nation’s social
safety net and affordable goods.
On paper, Syria still provides
free education and medical care and heavily subsidized fuel and food
staples. But scores of hospitals have been destroyed or damaged, medical
supplies are scarce, and bread and diesel sell for many times the
official price.
Yet in a polarized country, it is unclear if
economic troubles will turn more citizens against the government, which
blames foreign-backed terrorists and profiteering merchants and bakers,
who, Mr. Barakat said, “are playing a very dirty role.”
“You
could decide that you don’t want to support the regime,” said Jihad
Yazigi, the editor of Syria Report, a Beirut-based economic journal.
“But you can also blame the situation on other factors, like the
sanctions and the opposition.”
And economists said the inflation
was likely to harm the population more than it hampers the war effort.
The fall of the pound means it costs the government less to pay
salaries.
The government recently raised government salaries by
40 percent. But in real terms that does not cover the loss in buying
power. And at the same time, the Damascus economist noted, the
government raised the official price of diesel, adding to the
inflationary cycle.
The government still manages to pay salaries
across the country — even communicating by fax and messenger with rebel
groups to arrange for them to rendezvous with trucks delivering cash,
Mr. Barakat said. “The government employees come with the terrorists to
pick them up,” he said.
The government has a harder time with
subsidies, spending far more to make bread than it charges, Mr. Barakat
said, while shops and bakeries take advantage of subsidized diesel and
then sell bread at market prices. “Basically,” he said, “they are
stealing the diesel.”
Residents and bakers in opposition areas
say that the government favors loyalist areas with supplies and that
they have to buy diesel on the black market.
Reporting was
contributed by an employee of The New York Times from Damascus, Syria;
Hala Droubi from Dubai, United Arab Emirates; Hania Mourtada and Hwaida
Saad from Beirut; and Ben Hubbard from Cairo.
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