Enab Baladi – Jana al-Issa

The Central Bank of Syria (CBS) released on June 20 new 5000-Syrian pound banknotes into circulation.

The new 5000 banknote has nearly the same design as the 2021- 5000 banknote, which measures 158 by 65 millimeters and is brown in its overall color, with a subtle corresponding coordinating underprint.

The Central Bank statement stated that the new banknote has a difference in the size of the denomination number on the front face of the banknote and the replacement of the microscopic perforation feature of the number 5000 by embossed printing of the number.

The bank justified its decision to enhance the security features of the banknote, noting that the rest of the security specifications were kept without modification.

30 months into circulation

On January 24, 2021, the Central Bank of Syria announced the introduction of a new 5000-banknote for circulation in the markets, printed in 2019.

A statement issued by the bank at the time said that 5000-banknotes have, like their predecessors, high-security advantages that are difficult to forge or counterfeit and are easy to distinguish, and among these advantages:

• Relief printing that gives the banknote a distinct roughness (category number, inscriptions, signatures, a sign for blind people on the edge of each width of the banknote).

• A star-shaped mark at the bottom left of the paper appears in a uniform color when looking at the banknote directly, and the category number 5000 appears in multiple colors when you twist the paper.

• A sign in the form of a star whose features are complete on both sides of the banknote when viewed through the light.

• Number 5000 printed with visible color-changing ink with a kinetic effect, waving vertically in golden color with a light green background. The wavy lines appear in the middle of the category number if viewed directly, and when tilting the banknote, these wavy lines move up and down from the middle of the category number.

• On the back side of the banknote is a micro-perforation of the number 5000, which appears vertically in the middle of the left side of the banknote when viewed against the light.

• The watercolor image (the eagle bird), which is the emblem of the Syrian Arab Republic, and the category number appear when looking at the paper against the light.

• A glossy silver vertical thread with kinetic effects, and it contains the writing of “CBS” letters repeated that move when the paper is tilted, and when looking at the thread against the light, the number 5000 appears.

Forgery is useless

The Central Bank’s decision to issue a new version this year with a different design came after a number of citizens were exposed to the fact that some parties did not accept sums in the 5000 banknotes because the sensors of automatic money counters and the automated teller machine (ATM) rejected it. The same process with counterfeit banknotes, the local newspaper al-Watan reported on June 21.

The introduction of a new copy of the banknote that was introduced only two and a half years ago raises questions about the real reasons behind this and the impact of putting the two banknotes together in circulation, given that the bank did not clarify its plans to withdraw the copy that found security problems in it.

Doctor of Banking and Financial Sciences Firas Shaabo told Enab Baladi that changing some of the specifications in the new banknote is evidence of a defect in the previous one, which led to it being rejected by some automated teller machines (ATM), which exposed them to forgery.

Dr. Shaabo pointed out that the issue of counterfeiting the 5000 banknotes is not considered feasible, as its value is about half a US dollar. This means that the cost of counterfeiting a single banknote exceeds its value, so the reason for changing some of its specifications may be due to the presence of a security defect in it or a technical defect that requires modification.

The expert added that it is not common in the customs of countries, and it is evidence of mismanagement and decision-making regarding the security features of this banknote.

It is possible that a security flaw exists in the new banknotes that are offered, but that is during the trial period for issuing them and not after two and a half years, which reflects the failure of the Syrian regime at all levels of management in general, according to Shaabo.

Younis al-Karim, a researcher in economic affairs and executive director of the Iqtisadi platform, considered that the low quality of the old version may be due to the low cost that the regime pays for printing these categories.

Consequently, it is poorly printed, which makes the counters consider that the type of ink and the security thread are inaccurate.

In addition, the decrease in purchasing power makes the currency circulation process very fast, which causes it to wear out before the supposed period of time for that, according to al-Karim.

Changing banknote printers

The matter goes beyond a slight change in the features of the banknote, but rather it may refer to a change in the place of printing, “as the old version of the banknote was printed in Algeria,” while the new version may have been printed in another place outside Syria as well, researcher Younis al-Karim believes.

The Central Bank of Syria does not announce the location of printing the currency, while it was printed before 2011 in a printing press belonging to the Austrian Central Bank, but Western sanctions against the regime forced it to search for alternative options.

In June 2012, four Damascus-based bankers told Reuters that banknotes are being printed in Russia.

The Coin Update website, which covers currency news in the world, said in a report, coinciding with the launch of the first edition of the 5000-banknote in January 2021, that it believes that those banknotes dating back to 2019 were produced in a security printing facility run by the state instead of the Central Bank of Syria.

Al-Karim told Enab Baladi that the decision may indicate the lack of a mandate by the People’s Assembly to print new banknotes to counter inflation, so the bank chose the easiest way that allows it to print an unlimited number of 5000 banknotes, and thus it can manipulate the volume offered in response to the growing domestic market.

Al-Karim considered that the presence of two copies of the same banknote, one good and the other bad, leads to something similar to what happened in Iraq when the “Swiss” dinar was printed with high quality, and there was another dinar with local printing, which was put into circulation in the Kurdish areas outside the control of the Iraqi government.

This may indicate the regime’s desire to limit the banknotes of the new edition to its areas, while the use of the old edition may be limited to the areas of the Autonomous Administration of North and East Syria (AANES).

Two banknotes, What is the effect?

Regarding the existence of two copies of the same currency in circulation, Dr. Firas Shaabo believes that the impact of this on the value of the pound may be slight, but over time a problem may arise in not accepting the old version of the currency and fear of its circulation.

It may cause problems for some citizens in terms of daily dealings with it, and thus it becomes out of circulation, says Shaabo.

Although the Central Bank has not announced its intention to withdraw the old version of the currency, Shaabo believes that the bank will gradually withdraw it, with the new version replacing it.

Shaabo believes that the monetary mass offered in Syria is not known at all, and therefore an increase or decrease of a few million or billions of Syrian pounds will not have much impact on the level of inflation, given that it definitely exists, in his opinion.

For his part, al-Karim considered that the central bank would not be able to withdraw the old version of the currency from the market for several reasons, including the absence of tools, as collecting money from citizens is costly and requires the cost of collecting, transporting and spaces, which is higher than the economic benefit behind it.

Among the possible reasons for not withdrawing the old version are the collapse of purchasing power and financing the government deficit of state institutions, the possibility of increasing salaries, and the possibility of pumping quantities of foreign exchange coming from the Gulf states into Syria, and their need for the equivalent of the Syrian currency.

Al-Karim believes that the process of increasing the money supply will keep inflation levels high, but it will not lead to excessive inflation.

On the contrary, it may lead to a slight improvement in the value of the pound as a result of securing liquidity for the market, thus increasing the movement of production and simple commercial movement, the expert concludes.