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Damascus: A peace deal with Israel would undoubtedly encourage investment in Syria, and end the financial hardships imposed on Syria since relations soured with the United States back in 2003.
That is what many Syrians believe, taking into account that state coffers are empty, and the Ministry of Finance is resorting to dramatic measures to bring money into the state treasury. Prime among them was lifting the state subsidy on some fuels in May, which was costing the government $4 billion (about Dh14 billion)a year.
That subsidy is now gone, and the price of the fuel has risen by a staggering 350 per cent. The reasons, according to Prime Minister Mohammad Naji Otari, were that instead of going to ordinary Syrians, the subsidised fuel (one of the hallmarks of the socialist state) was being smuggled to Iraq, Lebanon, and Jordan.
Rising prices
Syria can no longer subsidise fuel when it is being wasted on neighbours or used up by the 1.5 million Iraqi refugees in Syria.
The increase in the price of fuel led to a sharp increase in all kinds of prices on the Syrian market. Public and private transportation prices increased anywhere between 61 to 77 per cent. So did salaries, and the cost of services, with some commodities increasing in price by around 300 per cent.
Syrians complained and the government responded by increasing wages by 25 per cent and enforcing greater restrictions on Iraqis coming into Syria.
The refugees are costing Syria no less than $1 billion a year. There are 100,000 Iraqi pupils receiving subsidised school education and another 40,000 receiving subsidised university education.
It is no longer a secret, however, that Syria is no longer as 'rich' as it used to be, since revenue from the oil sector is now in the deficit, reaching $157 million in 2006. Money is no longer coming in due to many years of corruption and mismanagement, from state-run companies and those that are still profitable, like telecommunications, tobacco, and banking, are few.
With regard to the third sector of revenue, taxes and tariffs, for the past few years the government has started decreasing all of them. But expenditure has increased by 19 per cent. Public spending increased from 195 billion Syrian pounds (about Dh14 billion) to 258 billion pounds. Salaries paid in the public sector in 2007 amounted to 229 billion Syrian pounds, with around 30 billion Syrian pounds in pensions.
Public spending
There are 1.3 million employees in the government sector and 587 retired workers. The percentage of people working in the government in Syria is among the highest in the world, and according to socialist laws, they cannot be fired.
This means salaries and pensions account for 50 per cent of the state budget. According to the International Monetary Fund, annual inflation in Syria reached 6 per cent in 2006. According to The Economist Intelligence Unit, inflation will continue to rise in 2008 "to an average of around 16.8 per cent".
The only way to bring all of that to a halt is to encourage Foreign Direct Investment which will simply not come so long as there are US sanctions, a sour Arab environment, and a threat of war looming with Israel.
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