Caesar Act repeal revives Syria’s hopes but no 'magic solution' to country's financial recovery

The lifting of the Caesar Act sanctions marks a pivotal moment for Syria’s economy, particularly the banking and money-transfer sector, which was among the hardest hit by Western sanctions.

Imposed in 2020 and entering into force in June that year, the U.S. sanctions led to the near-total isolation of Syria’s financial sector from the global banking system. It complicated foreign transfers and trade and pushed many Syrians at home and abroad to rely on informal channels to move money.

With the repeal announced, questions are mounting over the scale of its actual impact, the limits of any reopening, and whether the financial sector can capitalise on the shift amid deep-rooted challenges. These include weak public trust, a fragile banking infrastructure, and ongoing monetary restrictions.

Central Bank of Syria Governor Abdel Qader al-Hassriya posted that the repeal represents a significant step towards easing pressure on the Syrian economy after years of strain. In a post, he said it opens the way to reviving the banking sector and improving the financial and monetary environment.

The Caesar Act sanctions had been one of the main obstacles preventing Syrian banks from engaging with the global financial system, restricting external transfers and weakening banks’ ability to establish correspondent relationships. As a result, many customers turned to informal channels, he said.

Saleh Al-Hashem, chief executive of Al-Safi Exchange, told The New Arab's Arabic edition that the repeal was a turning point for exchange companies and money-transfer services. It directly stimulated remittance activity and reduced reliance on the black market.

Al-Hashem said, “Companies licensed after the liberation now have stronger regulatory and operational advantages than those that operated previously, including greater administrative flexibility, improved compliance mechanisms, and faster execution of transfers,” helping restore customer confidence.

“Remittance volumes have risen sharply in recent months, by as much as 300 per cent, indicating that a large share of financial flows is returning to formal channels after years of dependence on informal methods driven by sanctions and banking restrictions," he added.

“The repeal also eased concerns among Syrians abroad and allowed exchange companies to expand transfer networks to most Arab and foreign countries, either through bank transfers or immediate cash collection,” Al-Hashem said.

The repeal “offers an important opportunity for Syria’s financial sector but does not provide a magic solution to the economic crisis”, said Ali Kanaan, a Syrian economist. Any gains will depend on banks carrying out genuine internal reforms and improving transparency and governance.

The return of remittances through official channels could help ease pressure on the exchange rate; however, lasting stability would require coherent monetary policies, tighter control over public spending and reforms to the investment environment, Kanaan said.

Economist Karam Shaar cautioned against overestimating the impact of lifting the Caesar Act, saying sanctions were a major factor but not the sole cause of the financial sector crisis in Syria.

“Foreign banks remain highly cautious in dealing with Syria, despite the easing or removal of some restrictions, because of the compliance risks and weak institutional trust. At the same time, the remittance sector may improve relatively quickly, but any gains would remain fragile unless backed by deep legal and banking reforms,” Shaar said.

The black market will not disappear unless users see official channels as safer, cheaper and more stable, a process that will take time and require clear political will for reform, he added.