What does Syria need from the IMF? Does it meet aid conditions?

Damascus – Joulnar al-Ali: After a 16-year hiatus between Syria and the International Monetary Fund (IMF), recent statements suggest the IMF is prepared to support Syria.

Communication between the two parties has begun to assess the needs of key institutions, such as the Central Bank of Syria, and to provide financial and technical assistance to strengthen their capacity.

The goal is to enable these institutions to function effectively for the benefit of the economy and the population according to IMF Managing Director Kristalina Georgieva in recent press remarks.

Today, the Syrian economy is in near-total collapse. Some estimates place the cost of reconstruction at over $400 billion. A UN report suggests that at the current annual growth rate of 1.3%, it would take Syria 55 years to return to its 2010 economic level.

Additionally, a quarter of the population is unemployed, and nine out of ten Syrians live in poverty.

Given these dire circumstances, what does the Syrian economy require from international financial institutions like the IMF? What form will assistance take? More importantly, what will Syrian authorities need to do in return for such aid?

According to economic researcher Dr. Khaled Al-Turkawi, Syria’s primary need from the IMF is financial support. Reconstruction requires vast sums and only three major players are capable of injecting at least $1 billion.

First are the Gulf states, which have — so far — yet to offer any financial assistance. Second are Western powers, particularly the European Union and the United States. Finally, International financial institutions, which receive funding from multiple sources.

Among these, the European Union appears the most likely candidate to support the Syrian economy, alongside the IMF and the World Bank. However, discussions within the IMF are still ongoing. 

Three key issues remain under debate. First, the nature of IMF intervention — will it be limited to technical consultation, or will it involve financial assistance? Second, the mode of engagement with the Syrian government — should the IMF collaborate with the Central Bank, the Ministry of Finance, or the Ministry of Foreign Affairs? And what role will civil society play? Finally, the broader objectives — the IMF typically seeks to involve multiple stakeholders to achieve economic and social recovery, rather than merely injecting funds.

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The evaluation and discussions are expected to conclude by June, by which time the IMF will have a clearer understanding of Syria’s economic landscape and the potential scope of intervention.

Conditions for IMF Assistance

Al-Turkawi noted that the IMF usually intervenes when governments cannot secure financial support from other sources. If Syria receives aid from the EU or Gulf states, the IMF’s role may be restricted to providing technical guidance.

The IMF’s standard policy for intervention typically includes: reducing the number of public sector employees as much as possible; cutting social welfare programs and government spending while increasing taxes; encouraging foreign investment by offering incentives to investors and enacting competitive laws that grant equal opportunities to both foreign and domestic investors, and aligning with international financial and regulatory frameworks to ensure economic stability.

The Syrian government has already taken steps in this direction. It has declared its commitment to a free-market economy and implemented large-scale layoffs.

While these layoffs may have been driven by security concerns or corruption, they nonetheless align with IMF conditions.

Regarding whether IMF assistance would be sufficient to meet Syria’s economic needs, Al-Turkawi noted that the IMF could provide an initial financial injection.

For example, Tunisia — despite having a smaller population and geographical size than Syria — received around $5 billion from the IMF. While this amount is insufficient for Syria’s vast reconstruction needs, it could still stimulate economic activity. Meanwhile, the World Bank could play a role in long-term infrastructure and redevelopment projects.

Potential Benefits of IMF Involvement

Economic expert Younes Karim argues that Syria does not necessarily need direct IMF funding, as the loans and financial services provided by the IMF may not be the most suitable for its situation. Instead, institutions like the World Bank and other financial entities might be better positioned to assist.

However, the IMF’s involvement offers two significant advantages.

Firstly, it encourages other financial institutions to follow suit – if the IMF grants Syria a loan, it signals to other financial institutions that Syria is a viable borrower. This could enable the Syrian government to secure additional loans on more favourable terms under international standards, rather than through costly bilateral negotiations.

Secondly, the IMF provides expertise on currency stabilisation – the IMF has extensive experience in stabilising national currencies during crises. Additionally, its wide network of relationships with countries engaged in the Syrian economy could facilitate the implementation of economic recovery strategies.

Moreover, IMF intervention could help Syria align with Western regulations, making it easier for foreign investments to enter the country under transparent legal frameworks rather than through informal negotiations.

Since the IMF has shown interest in Syria’s economic liberalisation, it seeks to ensure that international institutions can invest in Syria without major obstacles.

The recent meeting between Syrian President Ahmad Al-Sharaa and UN Assistant Secretary-General Abdullah Al-Dardari reinforced this objective, emphasising the need for Syria to obtain international financial support while committing to economic reforms.

For Syria to access IMF assistance, it must take several steps. First, macroeconomic stabilisation, including financial and monetary reforms. Second, establishing functioning state institutions, a legal system, and transitional justice mechanisms. Third, forming a transitional government with popular legitimacy to align with Western economic standards. Finally, guaranteeing a free-market economy, ensuring that foreign companies can enter and exit Syria without political interference.

The cost of IMF loans

If Syria secures IMF loans, the government will face several obligations: negotiation leverage – if Syrian authorities appear weak in negotiations, the IMF may impose stricter conditions; debt service obligations – if repayment becomes too burdensome, the government may have to implement severe austerity measures; utilisation of funds – effective management of loaned funds is crucial. Misuse could deepen Syria’s debt crisis rather than facilitate recovery.

Is a 55-year recovery timeline realistic?

Karim dismissed the UN estimate that Syria would take 55 years to recover, calling it unrealistic. He criticised the use of 2010 as a benchmark year, arguing that the economic conditions at that time were among the catalysts for the 2011 uprising.

Moreover, the global and Syrian economic landscape has changed significantly. Syria’s shadow economy previously accounted for 70-80% of total economic activity, which the UN estimates fail to consider. The 55-year projection, he argued, exaggerates the scale of Syria’s economic collapse and ignores the potential for international cooperation in accelerating recovery.

He pointed to countries such as Qatar and the UAE, which became economic powerhouses in similar timeframes. If Syria takes decisive steps in the first three years post-conflict — demonstrating political will, combating corruption, and implementing sound economic policies — it could achieve significant recovery far sooner than the UN projection suggests.