Enab Baladi – Jana al-Issa

For a number of reasons, most notably benefiting from the price differences between the prices it imposes and the realistic figures of the value of the Syrian pound against the dollar in the “parallel” market, the Syrian regime resorted during the past years to creating several figures for the exchange rate of the dollar in Syria.

Since the beginning of 2023, the Central Bank of Syria (CBS) has taken a number of decisions under a common justification, which is “a step towards reducing the number of exchange rate bulletins issued by it, as part of its efforts to unify prices.”

In this report, Enab Baladi discusses the reasons for the regime’s desire to unify exchange rates after years of insisting on issuing several bulletins and its objectives behind the decisions that indicate this.

Four published prices

In Syria, there are several bulletins of foreign exchange rates against the pound, three of which are announced on a daily basis, namely the official rate, the banks’ bulletin, and the remittances’ bulletin, in addition to an additional unofficial price, which is the black market rate.

On April 2, the Central Bank raised the dollar exchange rate in the banks’ bulletin to 6,532 Syrian pounds from 4,522 pounds. It also raised the dollar exchange rate for transfers of “legal persons” received from abroad, to 6,500 pounds, instead of 4,500 pounds.

This was preceded by the abolition of the military allowances bulletin, which is the amount that must be paid as an allowance for compulsory service in Syria, and replaced it with the banks’ bulletin.

In early February, the bank raised the dollar exchange rate for remittances and exchange to 6,650 Syrian pounds and the euro exchange rate to 7,328 pounds, provided that it is periodically adjusted to match the currency exchange rate against the pound on the black market. According to the latest amendment when this report was published, it reached 7,250 Syrian pounds.

In a decision that was not published on the accounts of the Central Bank of Syria or the loyal media, and after years of intransigence, the Central Bank, according to a decision issued on February 9, began applying the price of the remittances and exchange bulletin, which is close to the black market exchange rate, to the allocated transfers for emergency response to earthquakes by UN, international and humanitarian organizations.

According to the S-P Today website, which covers exchange rates and currencies, the selling price of the dollar reached 7,550 Syrian pounds, and its purchase price is 7,500 pounds. For about a month, it has ranged between 7,300 and 7,600 pounds per dollar.

More US dollars

During the past years, press reports and research studies confirmed that the Syrian regime obtained large revenues from price differences by purchasing remittances sent to Syria at a fixed exchange rate that it determined, much lower than the black market exchange rate, which raises speculation about its recent decisions that refer to bringing exchange rates closer to the black market.

Commenting on the decisions of the Central Bank of Syria, the former Syrian Minister of Economy, Lamia Assi, said that the multiplicity of exchange rates was the main obstacle in attracting any investments to the country and that the discrepancy between the actual exchange rate and the one circulated on the black market made it difficult to invest in a “profitable and effective” manner.

Assi considered that the exchange rate can only be controlled by standardizing currency exchange bulletins and providing dollar sources in the market, whether they are related to financing imports or other needs.

Dr. Abdul-Nasser al-Jassim, Associate Professor at the Faculty of Economics at the Turkish University of Mardin, believes that there is a clear imbalance in the management of monetary and financial affairs at the ruling Central Bank, amid the absence of a clear vision and keeping pace with the changes that afflicted or afflict the Syrian economy with its board of directors, which is clearly reflected in financial and monetary affairs.

Al-Jassim considered, in an interview with Enab Baladi, that all the issued decisions are “improvised and reflexive,” and a large part of them come in the form of directives from guardianship authorities or interested parties.

Manaf Quman, economic researcher at the Omran Center for Strategic Studies, considered that the regime’s goal of the policy of bringing exchange rates closer to the black market rate lies in its desire to absorb foreign exchange liquidity in the market for its coffers.

Quman told Enab Baladi that the regime realized that the policy of fighting the black market price was useless and did not lead to limiting foreign exchange channels to the Central Bank’s coffers.

The researcher believes that the Central Bank has come to rely on a flexible exchange rate policy and moved away from the fixed exchange rate policy.

In early March, Fouad Ali, director of the Banking Operations Directorate at the Central Bank of Syria, said that amending the remittances and exchange bulletin on a daily basis increased the official market’s share of remittances in a “very large” way compared to the black market.

Ali stressed that the sums destined to the official market increased significantly after the decision, as it spared remittance holders from going to the “parallel market” and being exposed to its many risks.

“Financial reforms,” what is behind them?

The decisions taken regarding the unification of the exchange rate in the bulletins issued by the Central Bank is an attempt to prepare the financial and monetary structure when obtaining foreign aid and assistance in the context of the earthquake or aid that may result from the recent political moves by a number of countries towards the regime, al-Jassim said.

Al-Jassim pointed out that the matter here requires a logical presence in determining exchange rates and that the financial structure be favorable and appropriate.

This policy of the regime is related to other reasons, perhaps as a prelude to the government’s abandonment of its “imaginary” responsibilities that it has always convinced people of, in terms of controlling currency exchange rates and others, which may eventually lead it to “float” the price of the pound, according to Dr. al-Jassim.

The economist does not rule out that behind this policy there are external demands or dictations with the aim of “financial and monetary reforms” in preparation for the reconstruction phase or the existence of beneficiary groups that form pressure groups consisting of the economic partners of the regime and some businessmen from the fronts of the political power who now have economic interests that require the fiscal and monetary policy be realistic.

After the massive earthquake that rocked four Syrian governorates on February 6, there were many sources of cash flow from foreign currencies to Syria, including remittances from expatriates to their families affected by the earthquake, or with the aim of helping within the relief campaigns that were organized for them, or through remittances coming from international organizations, or from countries friendly to the Syrian regime.

Economic drain

The researcher Manaf Quman believes in regard to the impact of the policy of rounding exchange rates that the regime’s adoption of this policy indicates several facts.

The most prominent of which is the recognition of the weakness of the value of the pound and its purchasing power, the depletion of the central coffers of hard currency, the absolute dependence on foreign exchange in the markets, in addition to the lack of foreign aid that was pouring into the accounts of the Central Bank from Russia, Iran, and other allies, in addition to the suspension of credit lines that were valid from Iran.

According to these data, Quman said that it is necessary to collect foreign currencies from the market, pointing out that it may be expected in the coming months to adopt the dollar more than the pound in transactions in a way that leads to the spread of the phenomenon of “dollarization” in the country.

These factors will interact with each other in light of the difficult economic conditions that surround the Syrian scene and lead to more depletion of the pound with each event, amid the absence of expectations of an improvement in the value of the pound in the foreseeable future, Quman believes.

According to a report issued by the Jusoor Center for Studies in early 2021, the Syrian pound lacks the limits of resistance necessary to defend its stability, and it is difficult for it to withstand any shock, no matter how small, which confirms that it is vulnerable to a rapid decline.

The research report added that the impact of political and economic shifts in the exchange rate of the pound is often in the form of clear waves of rise, that is, a decrease in the value of the pound, which makes it difficult to determine the levels that it can achieve.