Already struggling Syrians brace for more austerity measures

These policies have placed 90% of the population under the poverty line

Ewan White

The al-Assad government’s embrace of the neoliberal market involves privatisation and subsidy cuts, which are causing widespread suffering and only benefitting the elite

Already struggling Syrians brace for more austerity measures

Joseph Daher

last update on 15 Apr 2024

There is growing concern in Syria over looming economic reform from President Bashar al-Assad, who looks determined to cut social support and increase privatisation in a country already grappling with major inequality and social injustice.

An embrace of neoliberal market economics is tantamount to more austerity measures and will further worsen the living standards of an already struggling population.

A symposium held at the end of March between al-Assad and university economists affiliated with the ruling Ba'ath party focused on ways to revive the country's economy.

According to news reports from the symposium, al-Assad said tackling unemployment should be the priority. To boost living standards, the president called for creating “middle-class citizens” through job creation.

Although the Ba'ath party was initially founded as a socialist party, al-Assad stressed that "for us, socialism is not the socialism of Karl Marx, i.e. the ownership of the means of production, but more of a general concept of equal opportunity for all segments of society."

He stressed that although the Ba'ath party would technically remain a socialist party, its economic policies could become "more flexible."

Early origins

The comments underlined an intention to embrace neoliberal economics, which goes back decades and can even be traced to the start of his rule in 2000. By 2005, the “social market economy” was adopted as a new economic strategy at the Ba’ath Party’s 10th Regional Conference.

RAMZI HAIDAR/AFP — A general view of the opening of Syria's Baath party first congress in five years, 06 June 2005 in Damascus. Syrian President Bashar Al-Assad vowed to promote reform and fight corruption.

It set out to establish the private sector—rather than the state—as the main engine for economic development and job creation. This approach toward liberalisation came with subsidy and pension cuts, which worsened existing socio-economic problems.

At the same time, the government did not adjust spending on healthcare and education to meet the needs of a growing population. Universities and hospitals were privatised, meaning many citizens could no longer afford higher education or adequate healthcare.

Privatisation even reached the electricity sector for the first time since 1963 when the Ba'ath party came to power.

The policies stoked a wave of inflation and a rise in the cost of living, which hit most of the Syrian population. In 2010, labour law reforms made it easier and cheaper for employers to sack workers, leading to increased layoffs.

The anti-government protests of 2011 did little to reverse moves toward privatisation. If anything, these policies only intensified.

In February 2016, the government announced a new economic strategy called “the National Partnership”, replacing the previous “social market economy”. The overhaul introduced “Public Private Partnerships, or PPPs, allowing companies to run state services across the economy, apart from the oil sector.

The minister of economy and foreign trade at the time, Humam al-Jaza'eri, pointed to a “legal framework for regulating relations between the public and private sectors that meet the growing economic and social needs in Syria, particularly in the field of reconstruction."

He said the moves would allow the "private sector to contribute to economic development as a main and active partner and to also help develop the public sector via the time-limited contractual relations with the private sector," he said.

The Syrian government looks determined to cut social support and increase privatisation in a country already grappling with major inequality and social injustice.

Health and education privatisation

Since the enactment of these policies, the government's appetite for privatisation has not only held but has intensified. In March, a conference called "Investing in Health: Potential and Goals" was held at the University of Damascus.

It included the Minister of Health, Dr. Hassan Ghobash, government officials, representatives of the pharmaceutical and insurance sectors, and members of the doctors' and pharmacists' unions.

Ghobash said his ministry had started the process of converting all public hospitals into entities with administrative and financial independence, as well as procedures to consider a public-private partnership model for managing medical facilities.

Similar plans exist for education.

Just weeks after the health conference, an "Investment in Education" conference was held in the same place. It included officials from the Ministry of Education, the president of the National Union of Syrian Students, and sector representatives.

Electricity sector privatisation and social aid cuts

Deeper privatisation is already underway in the energy sector. Conditions have been eased for provincial electricity boards to open up to contractors and to sell privately generated power to consumers.

Both measures are designed to encourage more private investment in the industry, which still requires much modernisation and rebuilding after the war.

The new law has already been used to award contracts to a Syrian company to manage the 930-megawatt Deir Ali Power Plant near Damascus, one of the newest and largest in the country, but without disclosing the firm's name.

Al-Assad's March policy meeting also addressed one of the country's most sensitive issues: subsidies and social support. The president claimed measures intended to help the poor were "actually having negative effects on them".

Reuters — Demonstrators in the Syrian city of Suwayda protest the deteriorating economic conditions on September 5 , 2023.

He stressed that, in principle, policies regarding subsidies and support must remain. However, the discussion was about the forms they take to allow them to be useful and support the people in need.

The current form of support, he said, lent itself to corruption, and fighting corruption would be key to improving citizens' livelihoods and facilitating equitable distribution of social spending.

Backed by economists, al-Assad called for measures that would target payments to people rather than subsidies on goods. Providing those in need with cash on secure electronic cards would help fight corruption.

The University of Damascus also hosted talks on this issue last July. A debate was held on "cancelling government support and converting it into cash support".

That policy has been supported by international monetary institutions, such as the World Bank and International Monetary Fund, for decades. And it is not new in Syria, where fuel prices have risen since the early 2000s.

In 2006, the IMF published a report calling on Syria to "reform petroleum price subsidies" and phase out such measures by 2010. The arguments were similar, that they were expensive for the state and were not targeted at those who most need the support.

Changes made to the scheme have included direct cash payments for farmers and increased salaries. At the end of the 2000s, Syrian officials announced, on several occasions, that most energy products, and especially oil derivatives, would be sold at market price by 2015.

The 2011 uprising slowed the process, but cuts on subsidies for various goods have increased in the last few years. Officials have said price jumps and rationing are due to war-related shortages.

In February, subsidy cuts doubled the price of bread, while the price of diesel fuel rose by more than 165%.

New austerity measures

In February, subsidy cuts doubled the price of bread, while the price of diesel fuel rose by more than 165%. These cuts are part of the state's new fiscal policy, which aims to boost income and stabilise the Syrian pound by enacting subsidy cuts.

Bonus payments to state employees have been used to offset rising prices, and some salaries and pensions have been lifted, with a 50% rise for civil servants and the military in February.

But it has not been enough to offset rising prices, which are taking a toll on the Syrian economy and its population. The typical public sector salary is not enough to sustain a family.

There is a cost-of-living crisis throughout Syrian society. One measure of inflation, the Minimum Expenditure Basket, doubled by last December and fourfolded in two years.

And it could get worse, with production costs up in line with fuel prices, to the extent that prices are likely to rise further. Businesses face the need to cut costs—and jobs—while many are at risk of failing altogether.

Outcry and second jobs

Energy costs, in particular, have a wide impact across the economy and have caused an outcry.

Industrialist Abdul Latif Hamida, a representative of the Board of Directors of the Aleppo Chamber of Industry, demanded that the government immediately review and reduce the prices of fuel and electric energy to prevent a wave of business closures.

Higher transport costs have been particularly felt outside Syria's major urban areas, taking up over half of some monthly salaries. As people struggle to afford to get to work, absenteeism has risen, and a significant number of students have stopped attending classes.

AFP — A boy works at a car mechanic workshop in the village of Killi in Syria's rebel-held northwestern province of Idlib, on September 18, 2023, as the school year resumes in Syria.

Civil servants, soldiers and other employees are seeking second jobs. Those who can't boost their income by legitimate means may be more prone to corruption.

Remittances from the country's diaspora to Syria have become increasingly vital to the national economy. They are the main source of financial support—or even basic sustenance—for a large proportion of the population.

Even pro-regime newspapers have featured articles on families across Syrian society dependent on remittances during Ramadan for everything from food to clothing.

The head of the Welders Association in Damascus, Muhammad Yahya Al-Khan, revealed to the al-Watan publication that the demand for red meat during the holy month fell 50% year-on-year, with purchasing power constrained. This demonstrates how government policies have worsened living standards.

Syria has become a country that is not just short of job opportunities but one where work does not pay enough for people to meet their daily needs and live with dignity.

Nonetheless, the government has signalled that lifting subsidies on oil and fuel and probably on other essentials, including bread, will continue.

The moves are seen as a way to boost al-Assad's chances for survival at the expense of a suffering population. In fact, only a very small minority of businessmen affiliated with the Presidential Palace have benefitted from these policies.

Decisions taken by the government in these past few years have not been about social justice or improving the conditions of the vast majority of Syrians. On the contrary, they have only pushed more people into misery, with 90% of the population now under the poverty line.

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