Syria should avoid the treacherous trap of the IMF

Many states, both Arab and non-Arab, have fallen into the International Monetary Fund’s (IMF) toxic and insidious grip. From Egypt to Argentina, Pakistan to Ecuador, Colombia to Angola—the list of countries locked into a devastating cycle of dependency by the so-called “lender of last resort” keeps growing.

Could Syria be the next to be lured into this perilous trap —a deep and tangled web that has wreaked havoc on indebted nations; triggering plummeting living standards, economic meltdowns, soaring inflation, currency collapses, and devastating financial crises?

Time and again, we’ve seen countries buckle under the weight of IMF-imposed conditions, facing not just skyrocketing prices but also threats to their economic and national security.

Will Syria be the latest casualty?

The question has come to the fore after recent revelations from the IMF’s Managing Director Kristalina Georgieva that communication had begun between the IMF and Syrian officials, “to understand the needs of key institutions in the country, such as the Central Bank of Syria”, in her words.

Georgieva also confirmed the IMF’s readiness to support Syria, and stressed the need for key institutions like the Central Bank to receive the necessary support to enable them to develop capacity and operate efficiently in a way which would benefit the economy and people.

This is a remarkable and rapid development, which marks the first of its kind after a 16-year hiatus between the IMF and Syria.

The comments come at a time when the interim Syrian government is searching for a new economic model which will differ radically from the corrupt and defunct system of the ousted Assad regime – a new system based on transparency, good governance, and anti-corruption efforts.

At the same time the new authorities are seeking the substantial financial resources required to fund the reconstruction of vast swathes of basic and state infrastructure which has been destroyed as a result of the Syrian war.

Reports by the World Bank and the UN have revealed that the costs of Syria’s reconstruction may reach $300 billion – a sum that vastly outstrips Syria’s pre-war GDP; and equally, far exceeds the funds held by Syria’s empty coffers and its Central Bank’s scant foreign exchange reserves. This is especially the case in light of the extensive looting of Syria’s wealth by the Assad family and other key regime figures over many years.

It’s still too early to know whether Syria will obtain substantial loans from the major international finance institutions in the near future, primarily the IMF and the World Bank; or whether it will secure finance and loans from international investors by issuing bonds in global financial markets.

However, these possibilities may now be on the table in the medium to long term – especially if Western sanctions on Syria are lifted, Syria’s Central Bank rebuilds its foreign exchange reserves, and the new government manages to recover some of the millions siphoned off by the Assad regime and stashed in banks and real estate across Russia, Switzerland, Britain, and beyond.

The above developments could be hastened by the prospect of the Gulf states pumping billions into the Syrian economy, whether through soft deposits, Central Bank support, direct government loans for essentials like food and fuel, or even direct investments in key projects.

This latter scenario seems likely, given the eagerness of Gulf nations—especially Qatar and Saudi Arabia—to help rebuild Syria’s state, economy, and financial sector.

In the meantime however, Syrians should do everything possible to steer clear of the IMF’s debt traps and those of other lenders – whether states or financial institutions. They must strive to avoid the mistakes made by countries that prioritised borrowing over production, exports, and building up their own dollar reserves.

This is because falling into these traps would spell disaster – deepening and further entrenching Syria’s economic collapse, wiping out what remains of the middle class, and ensuring millions of Syrians remain mired in an unending cycle of poverty, joblessness, indignity, rock-bottom living standards, corruption and monopolisation.

Moreover, it would shackle Syria’s economic decisions to the unfair demands of international creditors, like the IMF. The government would be stuck in an endless cycle of negotiations around loan agreements and would find itself continuously scrambling for new loans just to pay off old ones. Furthermore, vital state resources—including tax revenues—would have to be redirected into servicing these debts.

If this happens, despite finally escaping Bashar and his corrupt regime, the Syrian people may find themselves in an even worse predicament. This would be falling into an endless debt trap, presided over by the IMF, along with its ruthless terms and diktats, and their devastating aftermath: soaring prices, runaway inflation, a collapsing lira, an economy in freefall, as well as skyrocketing national debt.

In this case, Syria will have said goodbye to political tyranny under a murderous regime, only to replace it with a system of economic-financial tyranny and international exploitation by external creditors led by the IMF – the world’s top enabler of authoritarianism, backed by its powerful stakeholders, at the helm, the United States.

Mustafa Abdul Salam is an Egyptian journalist and heads the economics section of Al-Araby Al-Jadeed, The New Arab’s Arabic-language sister edition.

This is an edited translation from our Arabic edition. To read the original article click here.

Translated by Rose Chacko

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Opinions expressed in this article remain those of the author and do not necessarily represent those of The New Arab, its editorial board or staff, or the author’s employer.