Salary increased, Will prices rise?

The Syrian government's promise to increase salaries has been fulfilled, albeit not by the percentage previously announced shortly after assuming power, when it announced it would increase public sector employees' salaries by 400%.

With the delay in implementing this promise, and its implementation being less than the initial 200%, the question remains: Will this translate into an improvement in the purchasing power of Syrian employees? Or will the potential price increases absorb this increase in salaries, as was the case under the former regime?

Economic expert and advisor to the Ministry of Economy and Industry for Liquidity and Monetary Affairs, George Khozam, wrote two posts shortly after the salary increase, presenting a somewhat pessimistic reading of its results. However, he acknowledged in responses to some commentators on his personal Facebook page that the salary increase was an urgent measure given the significant deterioration in living conditions experienced by most Syrian state employees.

Khozam believes that the results of this increase will not differ from previous ones in terms of a decline in purchasing power and a rise in prices, given that most goods available in the market are imported or are manufactured using imported raw materials. Therefore, the salary increase will lead to an increase in demand for goods, which will increase the need for dollars to increase imports to meet the increased demand. This will lead to a rise in the dollar exchange rate at the expense of the Syrian pound and higher commodity prices.

The salary increase will also lead to an increase in the supply of the pound in the markets, harming money changers who have worked to dry up the liquidity of the Syrian pound. This will prompt them to sell the pound and buy dollars before its price rises rapidly. This will, of course, lead to a double increase in demand for the dollar, according to Khozam.

The economic expert distinguishes between two possibilities: the first, a slow rise in the dollar exchange rate, if the salary increase is funded by foreign aid. The second, a rapid rise in the dollar exchange rate, if the salary increase is funded by printing new currency.

The solution, according to Khozam, is always to revive local production and support the national industry.

Khozam is a vocal critic of the uncontrolled opening of markets to imports, which occurred shortly after the liberation and fall of the Assad regime, harming the already ailing national industry, according to many observers.

On the other hand, specialists agree that salary increases, despite concerns about their inflationary consequences, remain an urgent emergency measure, given the current deteriorating living conditions.

President Ahmed al-Sharaa issued two decrees on Sunday. The first stipulated a 200% increase in salaries and fixed wages for civilian and military employees in state institutions (the public sector) and the joint sector. The same decree stipulated that this increase would not apply to civilian and military employees affiliated with the former Salvation Government. The decree also included raising the general minimum wage to 750,000 Syrian pounds per month, including those working in the private and cooperative sectors.

President al-Sharaa also issued a second decree granting pensioners a 200 percent increase in the pension effective on the date of this decree's issuance.

The Ministry of Finance will issue executive instructions for implementing the two decrees, specifying the source of funding for the resulting increase.

These two decrees will take effect on July 1.