Enab Baladi – Jana al-Issa

The recently appointed governor of the Central Bank of Syria (CBS), Mohammed Issam Hazima, has taken a clearly different administrative approach from that of his predecessor, Hazem Qarfoul.

Hazima eased some of the restrictions imposed by the former CBS chief, Qarfoul, who tightened controls on the use of foreign exchange as a means of payment for Syrians.

Last April, the Syrian regime’s president Bashar al-Assad dismissed Qarfoul from his position as the CBS’s chief and issued a decree appointing Hazima as his successor after indirectly accusing Qarfoul of corruption and holding him responsible for the 2020 exchange rate hike.

After Hazima’s appointment, media outlets close to the Syrian regime mentioned that Hazima has great financial and banking experience accumulated during his work as deputy to former governor Qarfoul. Hazima’s competency came to light when he headed a committee of experts formed during the months in which the Syrian pound fell to record lows and tried to stabilize the exchange rate.

Hazima’s policy promises new dollars to state treasury 

Syrian economist and researcher at the Middle East Institute in Washington, Karam Shaar, told Enab Baladi that the former CBS governor Qarfoul has adopted restrictive policies criminalizing dealings with the US dollar currency and issued different yet parallel exchange rates for the Syrian pound against the US dollar, generating revenues for state treasury from differences in exchange rates.

Shaar added that the new CBS governor Hazima is attempting to bring closer varying exchange rates of the Syrian pound against the US dollar and intending to allow traders to bring in large amounts of hard currency into Syria.

According to Shaar, Hazima’s new policy will benefit the regime government’s economy as it will provide much more foreign currency returns to the state treasury.

The decreasing of variations in exchange rates will help to control manipulations by people who exploited rates variance to make money. It will also encourage Syrians abroad to transfer money to Syrians inside through official government channels, not through money transfer and exchange companies carrying out transactions at the black market’s rates.

Hazima’s new decisions allow traders to withdraw their desired amount of funds deposited in banks while still having the right to dispose of them freely in any country of their choice. Previously, the CBS tightened its grip on cash withdrawals, arousing anger on the part of traders and merchants in Syrian regime areas. 

About ten months after the last rise in the exchange rate of inbound money transfers and several record declines in the Syrian pound’s value over the past two years, the CBS raised the official exchange rate and foreign transfers exchange rate by 100 percent on 15 April, lifting the official Syrian pound’s rate against the US dollar from 1,256 to 2,512.

The CBS amended its bulletin and raised the exchange rate of foreign private transfers, Western Union money transfers, United Nations and its agencies’ remittances, and that of international humanitarian organizations and institutions to 2,500 Syrian pounds per 1 US dollar.

CBS’s official Facebook account published on 15 April that the latest monetary decisions are part of the Central Bank’s efforts to bring different exchange rates closer and encourage and attract foreign transfers and capital inflows through official channels to generate additional foreign currency revenues for the public interest.

One day before the CBS’s decision, the CBS raised the exchange rate of the 100 USD imposed on Syrians wishing to enter their country to 2,500 Syrian pounds to the US dollar instead of the CBS’s fixed rate of 1,256 Syrian pounds per 1 US dollar. 

The regime’s government also allowed licensed money transfer and exchange companies in its areas to hand over traders and industrialists’ remittances in the US dollar. Ordinary citizens were allowed to receive their transferred money at the rate of 2,825 Syrian pounds per single US dollar, which is close to the black market traded exchange rate.

The local pro-government al-Watan newspaper reported that CBS’s decision is aimed at providing foreign exchange sources in the domestic market, especially for merchants and industrialists endeavoring to meet their needs of raw and other materials through importing. The decision also aims at preventing them from hitting the black market to secure their needs for hard currency and increase demand for national currency.  

The newspaper said this and other similar monetary decisions are part of the government’s procedures to support the Syrian pound’s exchange rate and improve its value against foreign currencies.

Facade companies’ role in investments

Shaar said that one of the most prominent decisions issued with Hazima as governor of the CBS is the Syrian Cabinet decision No. 36, which allowed the establishment of a private Islamic bank in the form of a public anonymous joint-stock company called the Islamic National Bank, to be based in the Syrian capital of Damascus.

The state-run Syrian Arab News Agency (SANA) reported on 7 May that the bank’s capital is 25 billion Syrian pounds (SYP = about 8 million USD) distributed over 250 million shares, with a stock value of 100 SYP (0.031 USD).

The Lebanese New Generation Holding Company contributes to the bank’s capital at a share of 49 percent and the Syrian limited liability company of Investment For Transportation and Logistic Solutions at 1 percent.

According to Shaar, these “facade” companies help Syrian investors evade western sanctions by putting the Lebanese shareholder up front against the outside world and also help in avoiding taxes.

The New Generation Holding Company is the bank’s biggest shareholder. The Lebanese commercial registry records state that the company owners are Syrians, and one of them is from the Ghazal Hamawi family. The same family name is mentioned in the bank’s establishment decision as one of the Syrian shareholders with a 4 percent share under the name Mustafa Ghazal Hamawi. Shaar said that the two reported Syrian shareholders are probably related.

Would Hazima’s new policy cancel incriminating decrees of foreign exchange use?

Shaar pointed out that CBS’s new policy relaxation has nothing to do with the decision as to whether or not to repeal decrees criminalizing US dollar transactions. Those decrees are far from being canceled, and CBS’s decisions are related to easing the possession of foreign currency, not its trading.

On 20 May, Hazima stated that traders are permitted to possess, deposit, or withdraw US dollars from their bank accounts without being held accountable or questioned about their source.

Hazima said that the decree forbidding transactions in currencies other than the Syrian pound stipulated the prevention of foreign exchange trading and not possession. He added that the ambiguity surrounding the decree was intended “to stop traders from smuggling US dollars across borders.”

Hazima promised an imminent easing of restrictions on foreign currency entry to Syria, noting that to deal with the US dollar, one of the transaction parties must be a foreigner or Arabs residing in Syria. 

On 23 February, the Syrian Commission of Financial Markets and Securities proposed to amend the criminalization decree of US dollar dealers in the regime areas and set an appropriate legal mechanism to secure Syrians’ needs for foreign currency without contradicting the decree or the established monetary and financial regulations.

On 18 January 2020, al-Assad issued decrees No. 3 and 4, stiffening penalties on non-pound dealers.

Shaar said the Syrian pound’s future remains unpredictable under various factors contributing to the volatility of its exchange rate against the US dollar. However, CBS’s policy of adopting a gradual return to pump the dollar into the market is an important stabilizer that could affect the pound’s exchange rate.