Jun 28, 2020
The Economic Plans of Damascus
To deal with the ongoing economic crisis, the Ministry of Commerce is proposing two policies:
First: Stop subsidising imports, currently done by:
a) offering a preferential exchange rate to the importers of certain consumables
b) contracting directly with foreign suppliers
Second: Use the windfall from cutting the de facto subsidies to provide cash support to the needy. Identify the "needy" by testing whether they have a car, a property, a mobile phone, etc.
My views on the proposal:
Upside: Ample evidence suggests that handing out cash is more efficient and beneficial to all parties. Also, subsidies are wasteful. Finally, in principle this will also direct the support to the most vulnerable instead of everyone.
Downside: the operational costs of administering the support can be prohibitively expensive. How can you identify the needy? Syria may lack the infrastructure to operationalise the policy, regardless of the cost.
Earlier experience with the “Smart Card” suggests that implementing the policy will be challenging. Compared to the Smart Card, this policy is significantly more difficult to administer.