Syria prints more money to pay bills

The bustling Damascus souq, above, was shuttered after merchants closed their shops for a week. Kaveh Kazemi / Getty Images

Syria is printing money in an effort to pay government bills and shore-up the economy as international sanctions have caused the nation's currency to collapse and inflation to rise rapidly.

"The largest employer in the country is the government and they need to pay these salaries. That's why they are printing money," said a banker in Damascus who spoke on condition of anonymity for fear of reprisal from president Bashar Al Assad's regime.

"They have been defending the gate for so long and something had to be done to buy back some loyalty," he said.

The Syrian currency has lost 44 per cent of its value on the official market during the past year, trading at 63.70 Syrian pounds per US dollar, compared with 45 pounds before the uprising.

On the black-market, however, the currency is trading at 73 pounds (Dh4.21) to the dollar.

Syria's $27 billion (Dh99.17bn) budget introduced last November, the biggest in its history, was motivated by a desire to create more state jobs.

But the spending spree slowly ground to a halt as sanctions cut revenues, gradually pushing the government into a deficit. Moreover, the liquidity in the banking system has diminished, said Salim Akil, who recently moved his business from Damascus to Dubai following the economic turmoil caused by the uprising.

"A lot of money has been wiped out of the system as many investors moved to set up new businesses and factories outside of Syria," he said. "The regime is printing the money to save the economy, which is on life support."

Deposits at three major Syrian banks - Bank Audi Syria, Bank of Syria and Overseas, and Banque Bemo Saudi Fransi - fell 35 per cent last year, according to regulatory filings published on the Damascus Securities Exchange.

Syria's energy minister, Sufian Allaw, last month said international sanctions had cost the country $4bn. The economy was forecast to contract 5.9 per cent this year by the Economist Intelligence Unit.

Cooking-gas cylinders are selling for 1,400 pounds each, about 10 per cent of the average salary, up from 400 punds.

This month, merchants closed their shops at the Damascus souq for a week to strike against the massacre in Houla.

The mostly Sunni businessmen there were a key link to the Alawite regime of the former president Hafez Al Assad and that of his son and successor, Bashar.

"Syria doesn't have any supermarkets," said Farouk, an American-Syrian businessman who spoke on condition that his real name not be revealed. "When the souq closes, the entire city shuts down."

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