Syrians baffled by sharply fluctuating currency

Syrian pound’s exchange rate has improved with regime change but with little benefit to the battered economy

Stacks of Syrian banknotes are piled on a currency trader's stall at a market in Manbij, in Syria's northern Aleppo province. All photos: AFP

People queue outside the main headquarters of the country's central bank in Damascus as they wait to exchange US dollars at prices lower than the black market.

A Syrian fruit seller in the north-west Idlib province.

A busy shop in Al Dana, in Idlib province. The Syrian pound has been disappeared from the markets since the fall of the Assad regime.

A market stall in Aleppo province in 2021, 10 years after the uprising against former president Bashar Al Assad began.

People queue outside the main headquarters of the central bank in Damascus. Mr Al Assad's government fell in December.

Since the downfall of the Assad regime, general prices of goods have come down by up to 30 per cent in large urban centres including Damascus.

Petrol is sold by the side of a road in Damascus.

Use of the US dollar is starting to increase in Syria, as confidence in the national currency remains low.

A man sells petrol in Damascus. The HTS-led government aims to show it can fuel an economic recovery in Syria.

A currency trader exchanges Syrian pounds for customers in Damascus. The value of the currency has fluctuated in recent weeks.

At the busy Marjah Square in central Damascus, Rateb Farah, 25, peddles Syrian pounds in stacks on a cardboard box.

Sitting on a plastic chair with a makeshift table in front of him, he yells “Souri, Souri”, the Arabic abbreviation for the national currency.

The Syrian pound has been mysteriously disappearing from the markets since the fall of the Assad dynastic rule in December, driving up its value, although fluctuations are quick and steep.

On a good day, Mr Farah makes $12 in profit and on others he loses money, partly because no one is certain of the exchange rate to the dollar, with dealers across Damascus quoting wildly different rates. On Tuesday, the currency was trading at 8,500 Syrian pounds to the US dollar in the morning, 7,000 in the afternoon and 9,500 the following day.

The volatility illustrates the challenges to transforming post-Assad Syria from a business backwater into a modern economy free from the monopolies and legal murkiness that scared away investment and contributed to the creation of a sizeable underclass.

Mr Farah used to go hungry before the Assad regime fell to forces led by Hayat Tahrir Al Sham, a group now in control of most of the country. Currency control disappeared overnight.

HTS, an organisation formerly linked with Al Qaeda and Al Nusra Front, is eager to show it can lead an economic recovery and integrate Syria in the international financial system, which would help legitimise its rule.

People visit a market in Homs. Fourteen years of war have left the Syrian economy in tatters and even improvements under the new government have had little effect on most citizens. Getty Images

Syria went from a country where the mere mention of the word "dollar" in regime areas could land a person in jail, to an economy starting to dollarise, as confidence in the national currency remains low.

Under the former regime, the Syrian pound collapsed, reaching 15,000 to the dollar on the eve of Assad’s downfall on December 8, compared with 50 Syrian pounds to the dollar on the eve of the revolt against his rule in March 2011.

One dollar currently equals 9,000 to 10,000 Syrian pounds.

For the past three weeks, the Central Bank, now run by an HTS appointee, has been restricting access to deposits in the local currency, companies and individual account holders say.

The Syrian pound has become so scarce that some companies have started paying their employees in dollars, which deprives them of benefits from an appreciating Syrian pound, mainly lower costs of goods priced in the pound.

“We cannot access our accounts,” said the chief financial officer of one of the country’s largest private enterprises. He was speaking on condition of anonymity because of the sensitivity of the issue.

“Without these artificial restrictions, the pound will go back to its rate during Assad’s days,” he said.

Haitham Shadi, a currency trader in the capital city's old downtown, said the dwindling pool of local currency has allowed so-called hitan (whales) to dictate the market. The whales, he said, are a rich group of unknowns inside and outside Syria with large Syrian pound and dollar cash holdings. They buy and sell huge quantities, normally in the morning and evening, thus dictating the market.

“It is all a game” said Mr Shadi, who has transformed his clothes shop into an unlicensed currency exchange bureau.

Central Bank officials were not available for comment, nor anyone at the Finance Ministry.

Jihad Yazigi, editor of the Syria Report business and economy newsletter, said no official money supply data has been released but it is clear that printing money, which fuelled inflation, has stopped.

“The huge shifts we see in the exchange rate impede both investment and consumption, and harm exporters, as well as making budgeting and other business decisions difficult,” he said.

The former regime printed money to pay salaries for the security apparatus and public employees, as well as domestic government obligations.

Vijay Valecha, chief investment officer at Century Financial in Dubai, said "an excessive print of Syrian pounds has been driving inflationary rates".

It remains unclear, however, why the Central Bank is withholding pounds from the market. Another currency dealer with connections at the Central Bank said the new monetary authorities have frozen deposits as they sift through private accounts to identify business associates of the former regime and other loyalists.

Economic imbalances in the country deepened when Hafez Al Assad came to power in a 1970 coup. The middle classes, including merchants and bankers, also left the country as a command economy and bans on most private enterprises expanded.

His son, Bashar Al Assad, ushered in economic liberalisation soon after he inherited power in 2000 but the benefits mostly went to those who became oligarchs and who often used frontmen and junior partners to mask their monopolies.

Losers from Mr Al Assad’s economic policies, particularly people in the countryside hit hard by the stagnation, constituted the core of the revolt in 2011 against his rule. Many are core HTS supporters expecting an economic boom in the post-Assad era.

Two months after his downfall, general prices of goods have come down by up to 30 per cent in Damascus and in the other large urban centres that were under the regime’s control, although the prices have remained constant on a dollar basis.

The economy in the rest of the country, mainly areas near the Turkish border in the north and the Kurdish-ruled east, are already dollarised, so the Syrian pound is rarely used.

In Damascus, even premium chocolate made by the capital-based manufacturer Zanbarakji fell from 600,000 Syrian pounds to 490,0000. Electrical goods and appliances suddenly became far more affordable for those earning decent Syrian pound-dominated incomes, albeit a tiny segment of society.

At The Wall coffee shop in the old quarter, the price of one kilo of coffee beans has fallen from 140,000 pounds to 100,000 in the past two weeks. Converted to dollars, the price of coffee and almost every other product, has remained the same.

One employee at The Wall said the number of customers has not increased noticeably despite the price decline. “There is still no purchasing power,” he said.

The owner of a large phone shop was forced to lower prices on old merchandise priced in Syrian pounds to be able to compete. He has started quoting prices in the dollar to avoid more potential losses from pound fluctuations.

A retired government worker who was shopping with his wife said he has not felt any difference in prices because the couple live mainly on a $200-a-month transfer from their son in Egypt. These dollars now fetch significantly less in pounds. “Every gain is cancelled by a loss in Syria,” the man said.

Without sustained measures to lift Syria from the doldrums and restore confidence, currency gains look set to have little effect on the overall economy.

Additional reporting by Shweta Jain in Abu Dhabi