Enab Baladi – Zeynep Masri

Nine years of war have left their toll on the Syrian economy; many economic sectors have ceased production temporarily, not to mention the dramatic decline in Syria’s Gross Domestic Product (GDP) which came in line with the accelerating depreciation and extreme fluctuation of the Syrian pound against the US dollar. 

The spread of the novel coronavirus (COVID-19) pandemic in Syria was another nail in its economy’s coffin added to many existing challenges such as the Caesar Act and its impacts, the US and European sanctions, and the monetary and financial problems into the Lebanese banks.

Meanwhile, the Syrian regime’s government refrained from revealing the economic losses caused by the COVID-19 pandemic in its official statistics. Nevertheless, the Central Bank of Syria (CBS) hastened to announce a set of financial and economic decisions in mid-March within the Syrian regime’s measures taken to prevent a further outbreak of the virus.

The CBS decisions were intended to spare the country the “adverse” economic consequences of the pandemic, as it issued administrative decisions to reduce official working hours in private banks, and financial and banking institutions.

A package of measures

The CBS announced a package of measures over two months. These measures included suspending the monetary insurance payments with the Syrian currency for importers through operating banks to “facilitate” bank-funded imports, and to secure the necessities and essential commodities of basic materials and production requirements’ “without delay.”

The CBS also decided to suspend the freezing of the returned checks and bank accounts classified as frozen according to decision No. “1418” for the period between 15 March to 15 May.

CBS’s Credit and Money Council has issued a decision to amend the interest rates paid by banks, which are allowed to accept foreign currency deposits. The decision specified the minimum of the minimum interest rate at 3.5 percent annually for deposits in US dollars, and one percent for deposits in Euro currency. The resolution was intended to attract deposits in foreign currencies to banks, and deposits outside official banking channels.

According to the decision, the minimum interest rates for natural persons and juridical persons (a non-human legal entity such as an organization) are set at five percent per year on US dollar deposits for a year; however, the deposit amount should not be lower than 50,000 USD as a banknote cash deposit. 

As for deposits in Euro, the minimum interest rates are set at 1.5 percent for a year, on the condition that the amount deposited should not be less than 50,000 Euro (€ )as a banknote cash deposit.

Meanwhile, the CBS continued providing services of checks, money transfers, cash payments, deposits receipts, allowance payments, foreign currency purchases, and outstanding advance repayments. 

On the other hand, it prevented the transfer of profits from private banks to shareholders, asking them not to distribute any cash dividends from the profits achieved in 2019.

Instead, the CBS left the choice to the banks to recycle these profits in the next year or distribute them as free shares to shareholders.

A crippled economy

In an interview with Enab Baladi, the minister of economy in the “Syrian Interim Government (SIG),” Abdul Hakim al-Masri, said that the CBS and the Syrian Commission of Financial Markets and Securities (SCFMS,) aim to reduce the supply of cash in the market to alleviate the decline of the Syrian pound’s value, through a decision to prevent the distribution of financial profits to shareholders and companies

Al-Masri pointed out that CBS’s measures could lessen the economic losses for a short time and on a limited base. 

Nevertheless, their impact will not be clear, amid the continued collapse of the Syrian economy, which is facing a dilemma represented in the lack of production, domestic output, and exports, not to mention that most resource-rich areas are out of the regime’s control, according to al-Masri.

The economic analyst, Abdul Nasser al-Jassim, confirmed what al-Masri mentioned. He said, “the CBS is “crippled and has no mandate to make a decision,” practically the CBS is all about “talking decisions with minimal effect.”

According to al-Jassim, Syrian businessmen and ordinary citizens in Syria “know that the CBS is out of constructive tools to use in the market and make an impact,” which alludes to an inevitable result that the CBS measures have no role when it comes to improving the economic reality, and do not minimize its losses.

Foreign-exchange reserves in Syria

Al-Jassim said to Enab Baladi that frozen accounts, returned checks, and loans are “suspended” and that the moving rate of authenticated bonds, money, and loans was only at 12 percent.

Therefore, al-Jassim believes that the instructions to suspend certain frozen accounts have no effects in reducing financial and economic losses.

Meanwhile, Jalal Bakar, another economic analyst, thinks that the CBS is unable to take action because it has no foreign currency. “According to international sources, the foreign exchange reserve in Syria has dropped almost to zero,” as per Bakar’s expression.

Financial fiefdoms

The CBS’s Credit and Money Council released a decision on 26 March, allowing banks to postpone loan installments for customers for three months, excluding the recently granted loans.

The council stressed the necessity of banks’ commitment not to impose any commissions, fines, or delay benefits on this postponement, as well as the necessity of banks’ coordination with their clients to implement the decision.

Nonetheless, the Commercial Bank of Syria did not abide by CBS’s decision. It demanded its loaners to pay their monthly payments without delay, threatening to impose fines if they did not do so. 

In an interview with the pro-regime local radio “Sham FM” on 13 May, the assistant general manager of the Commercial Bank of Syria, Mayssa Kudaimi, said that the decision related to postponing loans’ payments is still under study between the Commercial Bank, the CBS, and Syria’s Finance Ministry.

Kudaimi pointed out that the procedures need a “long time” to be determined, indicating that the Commercial Bank has been working on the subject matter since the issuance of the government’s decision. She stated that “the Commercial Bank’s measures take time to come to force.”

Al-Masri attributed the Commercial bank’s failure to implement the CBS’s decision to postpone loan payments to their financial commitments. Al-Masri added that CBS’s postponement measure would prevent the banks from fulfilling their obligations to customers.

Al-Masri pointed out that it is not easy to apply such decisions because they will make it difficult for banks to supply funds, especially to depositors, which could lead to banks’ bankruptcy at some stage. 

However, al-Jassim attributed the reason to “the absence of organizational structures in Syria, obliging banks and financial institutions to abide by the CBS’s resolutions. 

In al-Jassim’s opinion, Syria’s banks are financial fiefdoms. He believes that it is up to the preference and allegiances of the “CBS” or the financial fiefdom’s manager to implement the decision or not.  Therefore, it is understood why the decisions of CBS are not being implemented by the Commercial Bank, as per al-Jassim’s expression.

The latest decision issued by the CBS until the date of preparing this report was to allow Syrian citizens abroad who are coming to Syria and holding the SOTO ticket (Sold Outside) to pay the value of their ticket in Syria upon their return and in the Syrian pound. The ticket’s value is based on the foreign exchange rate in the customs bulletin against the pound when issuing the ticket.

According to statements released by Syria’s Ministry of Transport, the number of Syrians abroad who were brought back to Syria reached about 1,200 passengers until 11 May. The ministry expected that about 10.000 expatriates will return in the coming days.

CBS’s lack of actions towards Syrian pound’s collapse

Regarding the CBS’s decision allowing to pay the price of tickets in Syria, al-Jassim said the regime’s government is trying to benefit from exchange rate differences in specific ways.

Al-Jassim clarified that Syria has four pound-dollar price bulletins, first of which is the customs bulletin or customs tariff for traders, exports, and imports. The second one is the exchange rate approved by the CBS every four months, which is followed in times of crisis. The third price bulletin is unofficial and determined by the currency exchange offices in an agreement between each other, besides the black market bulletin.

Despite the rapid fall in the Syrian pound’s value against the dollar, as the exchange rate reached on 16 May 1,580 Syrian pound (SYP) per dollar for purchase and 1.600 SYP for sale, the CBS did not announce any measures to respond to the pound’s decline.

Nevertheless, on 26 March, the CBS announced its decision to expand the use of its intermediary rate of 700 SYP to the dollar for import financing, remittances, and the selling of US dollars to the CBS, according to its price bulletin.

According to al-Jassim, the lack of actions by the CBS lies in its inability to pump large amounts of money to create a state of balance. Besides, al-Jassin added a further reason, which is “the absence of a genuine will on the administrative side of this sector which is linked and subjected to the regime’s desires to address the economic collapse,” as per al-Jassim’s expression.

The absence of real measures by the CBS will continue to exist as long as the ruling class and the financial administrations are not affected. The damage is limited to the most vulnerable category in Syria, its citizens, according to al-Jassim.