Syria devalues currency as new US sanctions hit

The war-torn country's central bank gave in to weeks of depreciation on the black market

A Syrian street vendor waits for customers in old Damascus. AFP

Syria's central bank devalued the Syrian pound on Wednesday giving in to weeks of depreciation on the black market as new US sanctions took effect.

The central bank raised the official exchange rate from 704 to 1,256 Syrian pounds to the dollar, in a statement published on its social media pages.

The previous rate had been in force since March.

Earlier this month, the war-torn country's currency hit a record low on the black market of around 3,000 pounds to the dollar, sparking rare protests, before appreciating slightly after an apparent injection of dollars.

• 

  After nearly a decade of war, Syria is crumbling under the weight of a repressive, corrupt ruling elite, a pandemic and an economic downslide compounded by western sanctions. AP Photo

• 

  Souvenir plates bearing the Syrian flag and the portraits of Russian President Vladimir Putin and Syrian President Bashar Al Assad are pictured in a shop in a bazaar in old Damascus. AFP

• 

  A man works in his metal workshop beneath a portrait of Syrian President Bashar Al Assad in old Damascus earlier this week. AFP

• 

  A Syrian boy carrying textiles is pictured in the bazaar in old Damascus. AFP

• 

  A Syrian shopkeeper waits for customers in a bazaar in old Damascus. AFP

• 

  Syrians walk in old Damascus in front of a portrait of Syrian President Bashar Al Assad. AFP

• 

  Syrian shoppers walk in the bazaar in old Damascus. AFP

• 

  Syrian men work in their bakery in old Damascus. AFP

• 

  Employees stack packets of the Syrian pound in the Central Syrian Bank in Damascus. AP Photo

• 

  An anti-Assad regime demonstration under way in Suweida, southern Syria, in early June 2020. AFP

On Wednesday, the rate on the parallel market stood at around 2,600 to 2,800 pounds to the dollar, traders said.

The devaluation comes as the United States prepares to implement new sanctions this week under the Caesar Act, targeting foreigners doing business with the Damascus government, as well as reconstruction of the country.

Zaki Mehchy, a senior consulting fellow at the London-based Chatham House think tank, said the central bank was trying to minimise the gap between the official and black market rates.

"It is trying to encourage people to use the official channel instead of the black market," he said.

But the pound would probably continue its slide, punctuated by short periods of appreciation, he said.

Syria's economy has been battered by nine years of war, and is now reeling from the knock-on effects of a financial crisis in neighbouring Lebanon that has stemmed the flow of dollars into government-held areas.

Analysts have said the recent lows on the black market are likely due to worries ahead of the introduction of new US sanctions, and the sudden fall from grace of tycoon and cousin of the president, Rami Makhlouf, which has set other top businessmen on edge.

The Damascus government has long blamed the country's economic crisis on international sanctions.

Last week, President Bashar Al Assad sacked his prime minister of four years after criticism of the government's handling of the crisis.

Before the conflict, the exchange rate stood at 47 Syrian pounds to the dollar.

The head of the Lebanese movement Hezbollah said on Tuesday that the new US sanctions against the Syrian government aim to economically damage the country and its neighbour Lebanon.

"The Caesar Act aims to starve Lebanon just as it aims to starve Syria," Hassan Nasrallah said in a televised speech.

"Syria has won the war... militarily, in security terms and politically," he added, describing the law which comes into force Wednesday as Washington's "last weapon" against Damascus.

Nasrallah also accused the United States of engineering the collapse of the Syrian currency, but vowed that Assad's allies would stand by the regime.

"The allies of Syria, which stood by its side during the war... will not abandon Syria in the face of economic warfare and will not allow its fall, even if they are themselves going through difficult circumstances," he said.

Lebanon too is experiencing the worst financial meltdown since the end of its own 1975-1990 civil war, as well as being rocked by months of anti-government protests.

"The Americans are pressurising the Bank of Lebanon to prevent it from putting enough dollars into the market," he said, charging that Washington was just using claims that Hezbollah was sending dollars into Syria as a pretext.