Syria struggles to move off subsidies
Writing by abuhatem on Saturday, 15 of December , 2007 at 6:52 am
ANALYSIS-Syria faces subsidy crunch as oil exports drop - Forbes.com
DAMASCUS,
Dec 14 (Reuters) - Syria runs on cheap gas oil but can no longer afford
to subsidise the fuel whose sulphurous fumes pervade the
traffic-clogged streets of Damascus.
State finances are already strained by depleting oil reserves that
turned Syria into a net oil importer this year.
Economists say delays in tackling the subsidy burden when the economy
was in better shape have made the problem worse.
“You cannot put it off indefinitely,” said Nabil Sukkar, managing
director of the Syrian Consulting Bureau. “And now we are losing the
stable macroeconomic framework, unfortunately.”
In the end free-trade and liberalization of markets benefits everybody. But in the beginning there are always hardships in the transition from a centralized and planned economy to free markets. Boris Yeltsin proved this when he attempted to carry out the transition from the USSR’s centrally planned model to the free market model. Such shock therapy as it was called created extreme poverty in Russia, and Russia’s economy still hasn’t reached its peak, however 10 years later there now exists a middle class and foreign direct investment in Russia’s markets.
Unfortunately, foreign direct investment in Syria is still very low. However, things are changing for the better as FDI has increased this year to approximately $600 million. A South African company bought a stake in the Syrian mobile telephone provider Areeba for example.
The liberalization plan seems to be well on its way, however the subsidy problem is going to cause some economic hard times for a period.
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Category: Economics
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