Nothing to Celebrate in Syria’s New Budget

Haid Haid

Image courtesy of Louai Beshara / AFP

Last month, Syrian President Bashar Al Assad approved a 2023 draft budget of 16.5 trillion Syrian pounds. Official media celebrated the figure, a 24 percent increase from the previous year. But viewing the budget based on its value in local currency is misleading.

With inflation factored in, the 2023 budget proposal is in fact the lowest ever in US dollar value. Even when calculated using Syria’s official exchange rate, the draft budget is about $3.6 billion, compared to $5.3 billion in 2022, $6.8 billion in 2021, and $9 billion in 2020.

In an interview with Syrian media, Minister of Finance Kenan Yaghi conceded that the drop in the budget’s real value is the result of high inflation. Keeping pace with inflation would reportedly require a budget three times higher than the one Al Assad approved. Spending that much would only exacerbate the state’s financial woes.

It would also contradict the government’s objective of reining in state spending to reduce the existing budget deficit.

A closer look at the budget’s distribution plan reveals that the government’s intention is to press on with its policy of reducing social support. Subsidies are a lifeline for much of the Syrian population, 90 percent of which live below the poverty line. Nonetheless, the poor state of the Syrian economy prompted a restructuring of the social safety net in 2020, and many residents have lost subsidies since.

The new draft budget approved by Al Assad offers no respite.

Despite the risk of public outrage, the 2023 budget slashes subsidies by about 12 percent, to 4.9 trillion Syrian pounds. The real value of cuts is closer to 40 percent. Hence, this year’s budget will likely result in a drop in flour and wheat subsidies, which will hurt Syrians who are already struggling.

Likewise, the budget covers only around 30 percent of the country’s fuel needs, meaning that family allocations of diesel and cooking gas will continue to be insufficient, pushing people to buy from the black market at a higher price.

A partial solution to these looming challenges would be to increase salaries or distribute grants among public sector workers, a strategy the finance minister said is reflected in the budget. But just because funds are allocated doesn’t mean they will be spent.

For example, the government reportedly spent less than 80 percent of what was allocated in the 2022 budget. One reason could be the government’s inability to secure enough revenue to meet its expenses. The state’s general budget deficit for 2023 is about 30 percent of the total, which is roughly 20 percent higher than last year’s deficit. In other words, there’s a possibility that the growing budget deficit will prevent the government from issuing much needed salary increases.

Even if raises are awarded, public sector salaries will remain insufficient to meet the skyrocketing prices for basic goods. The average cost of living for a Syrian family of five exceeded 2.8 million Syrian pounds in March 2022, more than 28-times what the average civil servant makes.

Given that the gap between income and living expenses continues to grow, widespread resignations and absenteeism among public sector employees is almost certain. That in turn will further undermine the performance of public institutions and the services they provide.

But rather than dole out cash, the regime will likely adopt a harsher predatory behavior to make residents pay more for services received. The free fall of the pound, which is expected to accelerate this year, will trigger further price inflation, and add another headache for Syria’s long-suffering population.

Despite claims that a key objective for 2023 is strengthening the economy, the government continues to prioritize spending over investment. According to published figures, 18 percent of the budget is set aside for investment, a paltry sum that will do little to improve Syria’s  economic health.

That’s because sectors that are essential to reviving the economy – particularly electricity – need a significant infusion of capital. The UN reports that 59 percent of Syrians have less than eight hours of electricity per day, and 30 percent have less than two hours per day. Fixing damaged power stations and building new capacity will cost many billions of dollars, money that isn’t allocated in the 2023 budget.

Ongoing fuel shortages, which will almost certainly continue, will further exacerbate Syria’s economic stagnation.

Amid such shortcomings, Syrians in government-held areas should be careful not to believe the regime’s false promises and brace themselves for even more belt-tightening – no matter what currency they count their money in.

Dr. Haid Haid is a Syrian columnist and a consulting associate fellow of Chatham House’s Middle East and North Africa program. Twitter: @HaidHaid22