Kathmandu— Following decades as a designated “state sponsor of terrorism,” Syria was formally removed from the US list on Monday, August 26th, clearing a significant obstacle to the country’s economic recovery and opening pathways for reintegration into the international financial system. The decision, announced by former President Donald Trump in July and finalized after a congressional review period, comes after the collapse of the al-Assad regime in December 2024 and the establishment of a new government committed to rejoining the global community. Analysts predict this move will encourage foreign investment and allow for increased financial flows into a nation grappling with widespread poverty and the lingering effects of nearly fourteen years of war, though significant challenges remain.

Longstanding Sanctions and Recent Changes

Syria was first designated as a “state sponsor of terrorism” in 1979 due to its support for Palestinian armed groups. Relations with the US further deteriorated following the 2003 invasion of Iraq, and the subsequent Syrian uprising against Bashar al-Assad’s regime in 2012 led to increased international sanctions and isolation. The removal of this designation represents a major shift, as it had carried additional financial and trade restrictions beyond those already in place. Along with the delisting of former rebel leader Ahmed al-Sharaa and Hayat Tahrir al-Sham, the move signals a broader effort to normalize relations.

Potential Economic Impacts

Experts believe lifting the designation will reduce legal risks for banks engaging with Syria, potentially unlocking crucial financial flows and investment. Vittorio Maresca di Serracapriola, sanctions lead analyst for Karam Shaar Advisory, noted that “the removal of restrictions on US foreign assistance and government contracting has the potential to open additional channels for development and reconstruction support.” The Central Bank of Syria reactivated its account at the Federal Reserve Bank in New York earlier this year, and the World Bank recently approved a $100 million grant for financial sector modernization. However, analysts caution that economic improvement will not be immediate.

Challenges to Sustainable Recovery

Despite the positive outlook, Syria faces significant hurdles. Nearly 90 percent of the population lives below the poverty line, and the country’s banking sector requires substantial reform. Ibrahim Kochaji, a Syrian banking and economic expert, described the sanctions removal as “a pivotal moment” but stressed it is “not an immediate remedy.” Obai Kurd Ali, a Syrian expert with the Tahrir Institute for Middle East Policy, emphasized the need for good governance, transparency, and anticorruption measures to regain investor confidence and ensure sustainable recovery. He stated that removing the designation is “one of the final major actions toward dismantling the complex web of US sanctions that isolated Syria for so long.”

Impact on Daily Life

While Syrians initially celebrated the fall of the al-Assad regime and improvements to daily life, many have recently expressed frustration with rising costs and a stagnant economy. Kochaji believes the removal of sanctions will gradually improve living conditions if managed effectively, potentially decreasing production and transportation costs and creating new job opportunities. However, he also cautioned that international banks and investors will continue to assess Syria’s risk environment, including its anti-money laundering framework and overall political stability.

Analysts agree that while the removal of sanctions is a crucial step forward, sustained economic recovery hinges on continued reforms, sound governance, and broader regional stability.

(With inputs from Al Jazeera)

Originally published on abcnews.com.np.