Enab Baladi – Jana al-Issa
The deterioration of the value of the Syrian pound over the past years and the arrival of the largest denomination of cash in circulation (a 5,000 Syrian pound banknote) to a value not exceeding half a dollar prompted Syrians to refuse to deal in small denominations for various reasons.
Despite the significant deterioration recorded in the value of the pound since the introduction of the 5,000 Syrian pound note in January 2021, the regime continually denies its intention to print or issue a larger banknote.
The regime justified this by saying that its issuance was based on studying the reality of the national economy and its requirements from the monetary side and in a manner consistent with the growth of local production through its monitoring of the markets and securing the trading needs of all denominations of banknotes.
According to what Enab Baladi monitored in the regime-controlled areas and the Autonomous Administration-controlled areas in northeastern Syria, where the Syrian currency is currently being traded, citizens and merchants refuse to deal in small denominations of cash, including 50, 100, 200, 500, and 1,000 Syrian pounds.
While some of them require that only new editions of the 2,000 and 5,000-pound denominations be dealt with.
The US dollar is trading at 13,350 SYP according to the S-P Today website, which covers the trading rate of the Syrian pound to the dollar. At the start of the revolution in 2011, the dollar was trading at 47 pounds.
Counting machines refuse it; confusion in dealing
The owner of an exchange office in the southern Daraa governorate told Enab Baladi about the existence of a state of aversion to dealing in some denominations of currency, such as 500 pounds and 1,000 pounds, because counting machines do not accept them, and the decrease in their value makes the issue of manually counting them cumbersome.
The exchange dealer, who requested that his name not be mentioned for security reasons, explained that money exchange shops do not accept these denominations from customers if they wish to buy dollars and require them to pay the value of the dollar exclusively in denominations of 2,000 pounds and 5,000 pounds.
Mohammad al-Kalash, owner of an exchange shop in the eastern countryside of Deir Ezzor, told Enab Baladi that the weak value of the currency is behind the refusal to receive large quantities of small denominations because of the confusion it causes in counting or shipping to other areas, and other accompanying difficulties.
Mohammad Rshaidat, an employee at the Real Estate Bank in Daraa, told Enab Baladi that the new printed denominations most widely circulated in the markets are the 2,000 and 5,000 Syrian pounds, and these are the denominations that the government feeds bank teller machines with to be withdrawn by citizens. In contrast, the ATMs also refuse to deposit the 500 and 1,000 banknotes.
For his part, Saleh al-Olayan, head of the Money Changers Union in the Deir Ezzor countryside, told Enab Baladi that the rejection of old currency with small denominations is related to the volume of trade, as merchants reject it due to the difficulty and size of transporting it, as they deal in millions of Syrian pounds, in addition to the fact that some money-counting machines have stopped accepting its count due to the big damage to these banknotes.
A source at the Central Bank of Syria confirmed earlier that all denominations being delivered to banks are of the 5,000 Syrian pound category, as the Real Estate Bank supplies more than two billion Syrian pounds daily of this category of banknotes.
Central Bank withdraws smaller categories
On September 6, a report published by the local Athr Press website indicated that owners of public transportation in Damascus refrained from charging bills of 100 pounds and 200 Syrian pounds under the pretext that they were no longer circulating in the markets.
A source at the Central Bank of Syria attributed the spread of the phenomenon of some denominations’ rejection to the mood of dealing with them alone, according to the site’s report.
Mustafa, a minibus driver, told Enab Baladi that dealing in denominations of 50, 100, and 200 has become almost non-existent, as they are often less valuable than the cost of the transportation fare, which is 500 Syrian pounds.
Meanwhile, Rshaidat said that the Central Bank withdrew from the markets the small denominations of currency, namely 50, 10, and 5 pounds, without an official announcement.
Every three years
Ayman Dasuki, a fellow at the Omran Center for Strategic Studies who covers political economy and local administration, told Enab Baladi that one of the most prominent reasons for refusing to trade in old denominations of currencies is the decline in their use in light of the decline in their purchasing value and their wear out more quickly, thus automatically exiting daily circulation among Syrians.
Since 2011, the Central Bank in Damascus has introduced the 1,000-pound note in 2015, then the 2,000-pound note in 2017, followed by the 5,000-pound note in 2021, and then introduced a modified version of the 5,000-pound note in June 2023.
It is clear from the above that the regime resorted to offering new denominations of currency approximately once every three years, and it often resorted to this to cover the deficit in the general budget in light of the increase in government expenditures, according to Dasuki.
Regarding the regime’s delay in issuing a new category of currency to meet needs, Dasuki believes that the matter is related to political calculations and technical issues that the regime appreciates, as well as preparing public opinion for this step.
10,000 banknote soon
In December 2021, the Central Bank of Syria issued a 5,000-pound banknote despite denying that it had been printed several times before.
After that, several media reports spoke of the regime’s intention to put the 10,000 banknotes into circulation in the markets, but the Central Bank denied this several times as well.
Following the introduction of the 5,000-pound note, which came a few months after the announcement of the general budget for 2021, officials in the regime’s government confirmed that the Central Bank did not resort to deficit financing and that the introduction of the new currency will take place with the replacement of the worn-out currency in circulation.
The regime’s government then bet that the exchange rate would not be affected by the new banknotes, but the Syrian pound declined against the dollar, reaching record levels, touching the barrier of 5,000 pounds per dollar for the first time in its history at the time.
Deficit financing has several forms, including the government resorting to issuing new cash without any equivalent for this cash (gold, oil, production), which leads to inflation, a decline in the value of the local currency, an increase in prices, and a decrease in the purchasing power of citizens.
Omran’s fellow, Dasuki, believes that with the increase in government expenditures following the recent increase in wages for state workers, resorting to the step of offering the 10,000 note has become more likely.
As for the repercussions of this, the matter is linked to the supply and demand for the Syrian pound and people’s confidence in it, according to Dasuki.
He pointed out that the introduction of new denominations of the currency was often linked to an increase in the monetary supply of the pound, a continuous decline in the population’s confidence in the pound, and a decline in its value and purchasing power.