Syria’s president Bashar al-Assad has taken emergency steps to try to halt a dramatic fall of the local currency, forbidding the use of money other than Syrian pounds for transactions with the threat of prison and hard labour.
The once-resilient Syrian pound has halved in value in the past 12 months as economic turmoil in neighbouring Lebanon makes it more difficult to access hard currency, while reduced foreign funding for enemies of the Assad regime cut illicit flows of dollars into the country.
The currency freefall has added to the burden on Syria’s long-suffering population after nine years of brutal civil war, triggering rapid price inflation as traders pay more for the dollars needed to purchase imports, with serious consequences for the more than 80 per cent of the population who live below the poverty line. It was not clear how Mr Assad’s decree, issued on Saturday, would apply to importers.
Simmering anger at the rocketing cost of living boiled over in the southern city of Suwaida late last week, where residents mounted their second day of protests on Friday. “This is a government of thieves,” they chanted.
Demonstrations are very rare in regime-held Syria, where people fear running foul of the security services if they express dissent.
People across Syria have reported rapid price rises of 20 per cent to 30 per cent in key commodities since October. There is no official inflation data, but a monthly food price study by the UN’s World Food Programme showed that in November, the latest data available, the cost of a standard food basket had increased by an average of 21 per cent year on year. WFP identified a “high correlation” between the Syrian pound’s depreciation and the price rises.
“Meat is a luxury now,” said Mirna al-Hasan, a Syrian journalist living in Idlib. “The most important thing is to find any food to survive.”
The pound started 2019 at around S£500 to the dollar, but started to spiral downwards in the autumn and in recent weeks has crashed below S£1,000.
The currency volatility, which comes after the Assad regime retook two-thirds of the country with the help of Russia and Iran, is “a reflection of the destruction of the Syrian economy”, said Joseph Daher, a Syrian-Swiss economist.
The pound’s decline highlights the vulnerability of Syrian markets to shocks, he said — notably the worsening banking crisis and dollar shortage in neighbouring Lebanon which has disrupted Syrian imports, strangled remittances from Syrian refugees and sparked panic in Syrian foreign exchange markets.
“The high costs of living are killing us,” said Yussef, a teacher in Manbij, a regime-controlled city close to the Turkish border. “If the situation continues like this, we will inevitably see the worst.”
Damascus has tried to stem dollar outflows; the government has stopped granting import licences for all but basic commodities, according to Syrian businesspeople, while a list of priority imports, eligible to be bought with dollars at a lower official rate, has shrunk from 40 items to 10.
Meanwhile Syrian business associations have created a “pound stabilisation fund”, although it is unclear how this could work.
In November Mr Assad announced a roughly $27 a month salary rise for government employees and a boost to pensions, in an apparent attempt to fend off criticism of the regime’s handling of the crisis.
Some reports have suggested that the government is funding the pay rise by printing more money, further reducing the currency’s value. However Ammar Youssef, a pro-regime economist in Syria, said there was enough money in circulation and new cash issuance was limited.
The regime only recently lauded the relative stability of the pound. In an interview in October, Mr Assad implied that during the war his government had averted the currency’s collapse by using “particular methods” of a “covert nature”.
He also received help from an unexpected source: foreign powers opposed to his regime, including Qatar and Turkey, have sent hundreds of millions of dollars to armed opposition groups in areas outside government control — hard currency that was traded back into regime territory.
As the regime has retaken ground, “those amounts are now down by 90 per cent”, said an exchange house operator in Idlib, the final pocket of Syria outside regime control.
Despite the continued fighting in Idlib, the operator said business agents from regime-held Syria were continuing to source dollars from the province, while the central bank had continued to supply the region with Syrian pounds.
Syria’s central bank has kept the official exchange rate at S£434 to the dollar, giving some privileged businesses access to cheaper dollars. But the institution’s foreign reserves have been depleted by its import bill and the loss of oil exports because of international sanctions.
“You can’t defend the [pound] if you don’t have foreign reserves to fund the official market,” said Mr Daher.
Mr Youssef said the central bank’s reserve levels were unknown.
An economic crash could add to Syria’s instability, said Matt Hemsley, policy adviser in Damascus for Oxfam, the global development charity. “There’s a real concern that if the situation worsens, the potential for social unrest will increase,” he said.
In Douma, a town 10km north-east of Damascus retaken by Assad forces after years of bombardment, hunger and siege, Haitham, a 24-year-old aid volunteer, said that despite the government regaining control, “the crisis isn’t really finished”.
The price rises had given him a sense of déjà vu, he said: “Now you feel like there’s an economic siege imposed on all of Syria.”