The new government in Damascus is turning to a free market economy, evoking all sorts of reactions.
Having being introduced because of the former government allegedly sponsoring terrorism, these sanctions have disrupted the economy, internal communications and triggered large waves of refugees. The 2011 Arab Spring sped this process up. According to statistics, the treasury’s total losses amounted to almost $500 bn.
The new Syrian administration, headed by interim president Ahmed al-Sharaa, has numerous times raised the question of lifting restrictions against the country to revive the economy, which is the most important factor of a state’s stability. A number of countries have eased sanctions, but link future progress in this area with the results of Damascus’ efforts in fighting terrorism, defending human rights and minorities, not allowing the resurgence of Daesh* etc.
At the same time, Damascus is betting on turning to a free market economy. According to the new leadership, the previous regime halted this process, fabricating corruption networks that controlled the markets and manipulating customs fees. The new authorities have begun re-assessing bans on the import of goods and the customs duties placed on them, which have been in place for decades.
Initially, the measures to move away from the previous mixed economy were met with enthusiasm. A number of goods that have been subject to protective tariffs for decades have fallen in price. The fact that refugees from neighbouring countries are returning to their homeland speaks to a certain optimism. According to the Office of the United Nations High Commissioner for Refugees, 437,226 citizens returned to Syria from neighbouring countries after the fall of the regime and until April, 2025. About one million internally displaced people have returned to their homes.
However, this enthusiasm was short-lived; the nationwide liquidity crisis and the slowdown in local business activity limit the purchasing power of citizens. In early 2025, the central bank imposed restrictions on cash withdrawals from banks to combat inflation. In a country where about 1.25 million people work in the public sector, people have to queue for hours at state-owned bank branches or at ATMs to withdraw savings in local currency.
In March of this year, Damascus launcShed another devaluation of the local currency. It should be noted that there is a significant difference between the official and the market exchange rate of the lira. Maintaining this gap allows the central bank to control the liquidity of the market, as demand for goods and services decreases due to a lack of cash liras. It also contributes to the outflow of liquidity from traders and the black market of foreign currency. However, the fall of the lira leads to an increase in commodity prices and affects the purchasing power of citizens, etc.
According to Al Jazeera Net, companies in Syria are finding it difficult to sell their goods, as the large influx of cheap imports is undermining local producers. Many business owners have stated that they are not against tariff reductions, but believe that they should be smoother and more flexible. In their opinion, many people desire to see control measures, as well as increased support for local industries so that they can compete with imported goods.
The biggest, most irritating issue is the mass layoffs affecting tens of thousands of public sector workers. Although some layoffs may be justified, e.g. due to corruption and excessive staff, their scale has put many at risk of not getting alternative jobs or assistance.
In light of fluctuations in the lira exchange rate, a shortage of foreign exchange reserves in the central bank, Syria’s debt of tens of billions of dollars, high unemployment and the general security situation, reviving the Syrian economy is not an easy task. The situation is complicated by the fragmentation of the economy inherited from the past. The diversity of its models depends on the geographical location, which disrupts national chains of added value.
Assistant Secretary-General of the United Nations Development Programme (UNDP), Abdullah Al Dardari, confirmed that the UNDP intends to allocate $1.3 bn to Syria over three years to support sectors such as infrastructure and digital start-ups.
Today, Arab political scientists note a mixed reaction in the country regarding the authorities’ strategies for building a free economy and their results. Some perceive them as a success, arguing that rapid steps are needed to maintain institutional stability. For others, such measures seem hasty, superficial, more for the sake of strengthening the power of interim President Ahmed Al-Sharaa than to promote meaningful transformations.
The Syrian economy, like most developing countries, is linked to politics, and bears the imprint of internal contradictions and the influence of external factors. On the other hand, it is obvious that the current policies will affect both the trajectory of the country’s development and the stability of the entire region with its changing geopolitical landscape.
*-banned in Russia
Yuri Zinin, Senior Research Fellow, Centre for Middle East and African Studies, MGIMO (Moscow State Institute of International Relations), Russian Ministry of Foreign Affairs
