Northwestern Syria governed by Turkey’s freefalling Lira despite economic risks
Enab Baladi – Zainab Masri
The precipitous depreciation of Turkey’s currency and skyrocketing inflation have adversely affected the economy and living standards of northwestern Syria, which adopted the Lira more than a year ago.
Local authorities in northwest Syria replaced the Syrian pound with the Turkish Lira (TL), which has recently hit record lows against foreign currencies and worsened citizens’ living conditions and purchasing power.
Amid the Turkish currency upheaval, calls for adopting the US dollar as the primary legal tender in trade deals in northwestern Syria arose. Others suggest that it is better to switch back to the Syrian pound from the Turkish Lira.
Commenting on the drastic drop in the value of the Turkish Lira, Syrians on social media platforms stressed that the depreciation of the Syrian pound’s value and the accompanying inflation, which tend to result in rising prices of food and essential items, has much less impact on people than the adoption of the Turkish Lira.
Is a return to the Syrian pound possible?
In June 2020, local authorities in northwest Syria–the Syrian Salvation Government (SSG) and the Syrian Interim Government (SIG)–formally approved the Turkish Lira for circulation in their areas amid uncontrolled devaluation of the Syrian pound. It is noteworthy that the Turkish Lira, back then, was more stable than the Syrian pound. In addition to the Turkish currency, the US dollar also circulates in foreign trade transactions.
Replacing the Syrian pound with the Turkish Lira in northwestern Syria came after the Syrian pound sank to a record low of around 3,500 pounds to the US dollar on a thriving black market last June. Several Syrians demand that this replacement be a temporary solution until a political solution is reached.
When the decision was made to replace the Turkish Lira with the Syrian pound, alternatives were not widely available; the Syrian pound hit an unprecedented low in value. Currently, the value of the Syrian pound has been relatively stable for more than six months. However, there is no economic guarantee that this currency will remain stable.
The Syrian economy is in shambles, and this has a deeper impact on the local currency. Besides, the constant switching between the Syrian pound and the Turkish Lira harms the economy of northwestern Syria. The current decline in the value of the Turkish Lira will not be permanent. It is expected that the Turkish currency will get stable soon, political economy researcher Yahya al-Sayed Omar told Enab Baladi.
For his part, the SIG’s Minister of Finance and Economy, Abdel Hakim al-Masry, told Enab Baladi that people in northwestern Syria are accustomed to using Syrian currency for purchases, indicating that the steep decline in the value of the Turkish Lira, even to very low levels, does not mean that the Turkish economy is collapsing.
Al-Masry noted that Syria’s economy is collapsed; there is no gross domestic product (GDP) and no exports. It is possible that the Syrian pound would hit new lows against the US dollar, where one US dollar could equal more than 10,000 Syrian pounds. In fact, without the finances provided by the Syrian regime’s allies, Russia and Iran, the Syrian pound could hit very lows. For now, they are not asking Syria to pay them back. And if the Syrian regime’s allies ask to get their money back–the amount of money is unknown–the Syrian economy could collapse immediately. All these factors together show that it is not wise to turn to use the Syrian pound in northwestern Syria.
On the other hand, Turkey is one of the 20 most economically powerful countries. The GDP in Turkey was worth 750.10 billion US dollars in 2020, according to official data from the World Bank. So, its currency cannot be compared to the Syrian one.
Why was the US dollar not adopted from the beginning?
Economic researcher Yahya al-Sayed Omar in his interview with Enab Baladi said it is not possible to replace the currencies used in northwestern Syria with the US dollar because, in order to convert from one currency into another currency, a stable supply of the new currency must be available.
The economic researcher added that there are no sources of US dollars in northwestern Syria except for flows of remittances from expatriates and some exports, which are invoiced in US dollars, to Turkey. These amounts of US dollars circulating in the region do not meet the actual demand for US dollars. Put another way, and the region will fall into a cash deficit in the event of the US dollar being adopted.
By contrast, the Turkish state provides stable sources of the Turkish money supply through its post offices (PTT), so replacing the US dollar with the Syrian pound would harm the economy of northwest Syria.
To clarify this point, al-Sayed Omar presented the Lebanese case as an example. After the collapse of the Lebanese pound in the Lebanese civil war, the US dollar was adopted in parallel with the Lebanese pound.
Luckily, introducing the US dollar into circulation succeeded because there are stable sources of the dollar, coming primarily from tourism and the export of agricultural products and others.
Subsidies or salary increases?
With the steady decline in the value of Turkey’s currency over the last period, Watad Petroleum, a fuel company operating in northwestern Syria, raised the prices of fuel and LPG gas cylinders five times in November alone.
Then, Watad Petroleum lowered the prices of its products after the Turkish Lira improved slightly with the visit of Abu Dhabi Crown Prince Sheikh Mohammed Bin Zayed Al Nahyan to Turkey.
The SSG in Idlib announced a new price for bread on 17 November; one bundle of bread costs 2.5 Turkish Lira, and the bundle contains only five loaves, weighing 450 grams. The surge in bread prices sparked anger among the residents due to the abysmal economic and living conditions.
Thereafter, the SSG’s Shura Council held a meeting with the Ministry of Economy on 23 November. The meeting was attended by Hayat Tahrir al-Sham (HTS) commanders, SSG ministers, a number of figures concerned with the economic situation, and the general commander of the HTS Abu Mohammad al-Jolani.
As stated at the meeting, the SSG will be subsidizing bread at a set price. Between 30-40 bakeries will benefit from the SGG’s subsidies. The SSG-subsidized bread, weighing 600 grams, will be sold for 2.5 Turkish Lira.
This can be regarded as a solution until the economic crisis is over.
Political economy researcher Yahya al-Sayed Omar explained that the ongoing devaluation of the Turkish Lira against the US dollar has a clear impact on prices in northwestern Syria. However, several measures must be taken to address this situation, such as setting a minimum wage and salary commensurate with the new costs.
Yahya al-Sayed Omar ruled out that the government provides subsidies for basic products because it cannot be that effective. The subsidy system, in general, could provide fertile ground for economic corruption.
The prevalence of corruption is clearly apparent in the regime-held institutions following the subsidy system.
Yahya al-Sayed Omar believes that there should be an increase in salaries and wages, and prices of goods and services must be controlled to ensure that they remain affordable because, in such circumstances, many traders take advantage of price uncertainty to achieve additional profits at the expense of consumers.
The SIG’s Minister of Finance and Economy, Abdel Hakim al-Masry, indicated that the SIG determines the minimum income a family needs in the region every two months, circulates it to all ministries and agencies, and shares it with the media outlets upon request. This is the basis on which wages are determined.
The government has the prime responsibility to provide flour and bread. In several areas, a bundle of bread weighing 700 grams is sold for one Turkish Lira, according to al-Masry.
He pointed out that petroleum products are exempt from fees. In addition, tariff duties on food products have also been lowered so that prices will not be affected. Furthermore, the government has given permission to all people to import different food products in order to create a perfect competition that keeps prices within reasonable limits.
The World Food Programme(WFP) said that a record number of Syrians are now food insecure, and 12.4 million people are now struggling to access a basic meal.
This is almost 60% of the country’s population. This is the highest number recorded in the history of Syria, an increase of 57 percent (4.5 million people) over the previous year.
“The price of a basket of staple foods has more than doubled since last year and is now beyond the reach of millions of families,” according to UN statistics.
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