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Measures to alleviate impact of decrees prohibiting dealing in foreign currencies other than the Syrian Pound

Market in Damascus - 5 May 2019 (Enab Baladi)

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Enab Baladi- Mais Shtian

On 18 January, the President of the Syrian regime, Bashar al-Assad, issued decrees No. “3” and “4,” to tighten penalties for non-Pound dealers, while criminal security patrols were active and arrested a large number of people with charges of dealing in foreign currencies.

The two decrees caused a wave of discontent and fear among the citizens; however, the regime’s government resorted later to a set of measures to reduce the impact of these decrees, especially for traders who considered them obstructing and sometimes threatening their commercial and industrial activities.

Enab Baladi monitored after the decrees’ issuance, the demands from some of the leading industrialists and merchants, to facilitate their access to foreign currencies to finance their imports.

Without documents …The Central Bank buys US dollars at a preferential rate

Two days after issuing the decrees and amid citizens’ fear of being punished for dealing in the black market, where the dollar is sold for an amount exceeding 1000 Syrian Pounds (0.735 USD), the Central Bank of Syria (CBS) intervened with an announcement. The CBS announced its willingness to buy dollars from citizens at a preferential rate of 700 Syrian Pounds (0.515 USD) for every US dollar, while the official exchange rate in CBS is 437 SYP (0.321 USD).

On 20 January, CBS stated on its Facebook page that its doors are open to purchase foreign currencies from citizens at a preferential price without documents, out of concern for citizens’ interest and to reassure them and make sure they will not be subject to legal accountability, prosecution or blackmail by manipulators on the black market.

Reducing import deposits

The Ministry of Economy and Foreign Trade issued at the beginning of February, a decision under the heading “facilitating import processes and supporting traders,” which provided an exemption to ten imported goods from the import deposit requirement of 25 percent of traders import license.

These goods include sugar, rice, tea, mate, canned tuna, sardine, oil, samoon bread, baby formula, pharmaceuticals, and raw materials.

Previously, an importer was required to deposit funds equivalent to up to 40 percent of their import license in chartered banks, divided in tranches of 25 percent as a deposit, and 15 percent as a trust in the Syrian pounds without interest, according to Resolution No. 944 issued on 21 November 2019.

Increasing the list of subsidized imports by the Central Bank

Last February, CBS announced expanding the list of its subsidized imports at the price of 434 SYP per US dollar (USD) based on its official exchange rate. It also declared a list of goods to be funded at the preferential rate of 700 SYP (0.515 USD).

The subsidized goods at the official exchange rate included those imported for the Syrian Trade Corporation’s benefit, while the list of goods supported at a preferential rate included imports of essential commodities as well as industrial and agricultural production requirements.

On the other hand, the Subsidized goods at a preferential exchange rate included import licenses and permits granted to those who contract with public sector entities to supply goods for the latter’s benefit (except for goods previously subsidized at the official exchange rate of 437 SYP (0.321 USD.

 SCB attempts to recover from limiting dollar use

According to a statement by Lina Yahya, director of Foreign Relations of SBC, during a seminar on decrees “3” and “4 ″, late February, she said that SCB set a limit on foreign-currency cash withdrawals at an amount of 5000 USD.

Yahya referred to citizens’ complaints about some private banks that do not allow depositors to withdraw more than 2000 USD per week, and she said in this regard: “a complaint can be lodged against these banks at the Central Bank,” according to the local newspaper, al-Watan.

However, if the fund was transferred to the depositors’ account, in that case, the bank is not obliged to provide foreign currency if not available, yet still obligated to transfer the request to any other bank with foreign currency.

Yahya reminded of the circular issued in July 2018, which gives the possibility of bringing foreign currencies in cash through border outlets, provided that the source of funds is declared, and their value does not exceed 100,000 USD or other equivalent foreign currencies.

Syrians have the right to take out a maximum of 10,000 USD in cash, through border crossings, she added.

Yahya also asserted that there is no limit to the amounts of foreign currency that can be brought into Syria as transferred funds.

Would supporting traders help mitigate consequences of the ban?

Researcher at the Omran Center for Strategic Studies, Muhammad al-Abdullah, said in an interview with Enab Baladi that the regime’s government is trying hard to mitigate the negative repercussions of banning foreign currency dealings on traders through a set of measures.

Those measures are such as increasing the number of imports funded by the CBS, reducing importing’ deposits, hoping they would contribute to importing and providing essential goods in the Syrian market, in light of the apparent shortage and high pricing of these goods.

He pointed out that the process of supporting traders came after signs of the Syrian regime’s phasing-out support for essential goods, and thus trying to evade the burden of negative consequences resulting from the shortage of goods and high pricing, along with the massive public discontent that will follow.

Al-Abdullah added the regime is aware of the difficulty of the next stage and the substantial impact of the sanctions on the country, especially with indicators of lack of some essential goods that made them unaffordable.

Would the 1980s experience help fix the current dilemma?

The increased economic pressures and the accelerated collapse of the Syrian Pound, pushed the regime to implement what could help it to overcome this stage with an apparent confusion in both decrees and decisions.

The regime also seeks to benefit from its previous experience during the economic blockade of the 1980s, when the former president, Hafez al-Assad, prohibited dollar dealings, “but these decrees will not be effective this time due to the different circumstances,” according to al-Abdullah’s belief.

The researcher stressed that the Syrian markets in the 1980s were somehow self-sufficient, while the markets now are experiencing a significant shortage of goods and materials with the inability to cover all needs through local production. Therefore, markets in Syria are prone to more chaos and unrest because of this lack of essential goods and high prices that affect citizens’ capacity of consumption.

 Syria’s reconstruction phase will eventually cancel decrees “3” and “4”

According to al-Abdullah, the regime will gradually cancel the decrees prohibiting dealings in foreign currencies at the start of the reconstruction phase, as they are not in conformity with the reconstruction process for local and foreign companies, especially in the manufacturing and construction sectors, which require flexibility in import operations and thus the need for dealing in foreign currencies on a large scale.

He added these decrees are primarily related to economic sanctions imposed on the regime and the prevention of any economic entity from dealing with it in the framework of the reconstruction. Consequently, when these sanctions are lifted, and the reconstruction process begins, decrees “3” and “4” will no longer be needed.

Decrees No. “3” and “4”

Decree No. 3:provides imprisonment and the payment of a fine for those dealing in other than the Syrian Pound. The decree was an amendment to Article No 2 of Legislative Decree No. 54 of 2013, which used to punish non-Pound dealers with imprisonment from three months to three years.

According to the new decree, any person dealing in a currency other than the Syrian Pound in commercial transactions “shall be sentenced to temporary hard labor for no less than seven years.”

They shall be punished with “a fine equivalent to twice the value of the payments or the amount in use or paid, as well as the services or goods offered;” in addition to confiscating payments, or sums involved or precious metals for the benefit of the Central Bank of Syria.”

Decree No. 4 “imposes the penalty of temporary detention, and a fine of one to five million Syrian Pounds, “for anyone who circulated, published or republished fabricated facts or false or fictitious allegations by any means, to cause devaluation or instability in national banknotes or exchange rates specified in official bulletins, or to undermine confidence in the reliability of the country’s currency and bonds.”

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