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Government, desperate for cash, imposes special tax on state workers and ban on importing cars Six months of insurrection and crackdown have taken a severe toll on the Syrian economy, with the currency weakening, recession deepening and the government so short of cash that it has been forced to levy a special tax on state workers. The vital tourism industry has all but ground to a halt, depriving the country of more than £5bn in annual revenues. Cash reserves are so short that the government has suspended the import of cars to “conserve the country’s foreign reserves and to reallocate it to the lower income groups”, according to the Sana state news agency. “In February both of my hotels were booked up months in advance – and all were cancelled. Today I do not have a single booking for now or any time in the future,” said the manager of a chain of boutique hotels in Damascus’s old city. Workers at the Central Bank of Syria in Damascus said the government had asked public sector employees to “contribute” about £6.50 of their monthly salary to a fund for the government. Employees in the state sector earn on average about £160 per month. The governor of the central bank, Adib Mayaleh, who was denied a visa to attend a World Bank and IMF meeting in Washington last week, said in August that Syria had spent £1.3bn defending its currency. The IMF expects the Syrian economy to contract by 2% this year. Officially, exchange rates have remained at around 66 Syrian pounds to the euro, but private currency outlets are selling euros at 73 pounds. Syrians travelling abroad and seeking foreign currency must provide their visas and plane tickets to the country of departure. Dollar transactions into and out of the country have almost ground to a halt in the face of US sanctions and there are signs that foreign banks are refusing to do business with Syrian companies. An EU ban on oil imports which comes fully into force in November will have the most impact as Europe accounts for 95% of Syrian energy exports. Turkey is also preparing sanctions which could impact on bilateral trade worth £1.5bn a year. Analysts say Syria could replace some of its lost income by redirecting business to countries such as China and India, but this will take time and may not be as easy as Damascus hopes. Steven Heydemann, Middle East analyst at the US Institute of Peace, said: “The economic situation in Syria is very serious indeed. There are reports the Iranians have offered to provide [President Bashar al-Assad] with $6bn to tide him over, but no evidence they have delivered on their promise, at least not so far.” Heydemann added: “The impact of sanctions will gradually strangle activity. The Syrian government likes to give the impression it’s business as usual, but the reality is very different.” Yet predictions of economic collapse have been premature. Some experts claimed the government would soon run out of cash and not be able to pay employees in the massive state sector, but it continues to do so. A foreign ministry official made clear the regime believed itself to be in a strong position. “The army is using only 10% of its capabilities,” he said. The official acknowledged that business had slowed to a standstill and anger at the government’s attacks on civilians had grown, especially in Damascus, but insisted the government was still strong. Ali, a businessman and currency dealer in Damascus who imports products from Europe and Asia, said the import ban would only worsen the economy. “There are now hundreds, even thousands of businessmen who have no work today. Panic will set in,” he said. Western diplomats in Damascus said broader sanctions were in the pipeline which could include a blanket ban on all EU investment in Syria, as well as further measures aimed at the regime’s business supporters. The business elite is regarded as a pillar of support for Assad, but there have been reports that some merchants have been covertly funding the opposition. Brussels said recently it was considering additional sanctions against Syria which could include a ban on exports of some technology products, and measures to hit telecommunications and transport. But getting the approval of all 27 EU states is a long and arduous process and could take many months, with some countries, such as Sweden, sceptical that sanctions will prove effective in bringing down Assad’s regime. Charities have expressed concern that if the international community turns the screw too tightly this could lead to growing impoverishment of Syria’s citizens. Earlier this month Syria’s finance minister, Mohammad Jleilati, admitted unrest and sanctions were putting pressure on the economy, but said GDP would still rise by 1% this year. Syria Bashar Al-Assad Arab and Middle East unrest Middle East Richard Wachman guardian.co.uk