The Dollarization of the Syrian Economy
Al-Ittihad, UAE, November 15
Syria’s decision to join the US-led international coalition to combat the Islamic State has made it the 90th committed partner in this campaign, marking a pivotal moment in regional cooperation. The US Embassy in Damascus called the move “an important step toward working alongside the United States and partner countries in the fight against terrorism. It is part of the process of building a secure and stable Syria and will enable security cooperation and joint training, enhancing the protection of Syrians from terrorism and allowing for the restoration of stability and the strengthening of reconstruction opportunities after 14 years of devastating war.”
This development fits squarely within Syria’s new effort to break from its past, shed its longstanding reputation as a state sponsor of terrorism, and anchor itself within both the regional security framework and the international order. President Ahmed al-Sharaa views cooperation with the United States as an opening for his country and sees the joint campaign against the Islamic State as a strategic political gateway for Syria.
At the same time, Damascus is working to secure a desirable regional role by capitalizing on neighboring states’ need for stability as a prerequisite for economic revival, as well as major powers’ need for local partners capable of managing security and safeguarding interests. This comes at a moment when Washington has spent decades reshaping regional dynamics to serve its own strategic aims.
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For that reason, major American media outlets described the meeting between the Syrian and American presidents as a “historic event” that ended decades of estrangement and marked a profound shift in Syria’s place within US strategy. The fall of the previous Syrian regime opened the door to one of the most complex economic battles the country has seen in decades. Rapid inflation, collapsing trust in the national currency, and the rise of black-market speculators—among other factors—turned the Syrian pound into a symbol of national crisis rather than a functional instrument of exchange and value.
But with the new administration taking office, restrictions on the dollar were lifted after the repeal of Decree No. 3 of 2020, which had banned its circulation under penalty of imprisonment. Dollarization quickly spread across the country, no longer confined to the private sector but extending to public institutions as well. Its impact deepened with the arrival of promised Arab and foreign investments—estimated at around $28 billion—alongside the return of Syrian investors eager to launch projects across multiple sectors.
Without question, the dollarization of the Syrian economy carries important benefits, including shielding individuals and institutions from the risks of currency depreciation and volatility, protecting against inflation, and encouraging both domestic and foreign investment. It also helps integrate the local economy into global financial systems. Yet it comes with substantial risks, especially because full dollarization undermines monetary independence and erodes confidence in the national currency, which remains a core symbol of sovereignty. Recognizing that limited activity by existing banks is insufficient to counter dollarization and protect the lira, Central Bank Governor Abdulkader Husrieh announced a long-term strategic plan to double the number of banks operating in Syria—from 16 today to 30 by 2030—as part of a broader effort to restructure a banking sector severely weakened by years of civil war and international sanctions.
Adnan Karima (translated by Asaf Zilberfarb)
