Enab Baladi – Jana al-Issa

The cessation of a series of decisions that were in effect before the escape of the ousted president Bashar al-Assad on December 8 led to the stoppage of most foreign currency sources flowing into Syria’s treasury.

Amidst inaccurate figures regarding the size of the reserves or the available foreign funds in the treasury, questions arise about the ability of the caretaker government to secure Syria’s foreign currency needs without plunging it into a financial crisis, adding to the collection of economic crises it is suffering from.

Dwindling sources

The former regime’s government worked to secure foreign currency from several sources, most notably a decision that required Syrians and those in similar situations entering Syria to exchange 100 dollars upon their entry through border and air crossings.

It also financed the treasury with military service exemption fees imposed on young men obligated to join the army, in addition to compelling merchants to convert and freeze their funds at the Central Bank of Syria (CBS) according to a mechanism that traders complained about, known as the “import financing platform.”

Funds received from transactions conducted by Syrians at the Ministry of Foreign Affairs and its consulates, such as document authentication and issuing or renewing passports, serve as a primary source of foreign currency; however, these transactions have been suspended since al-Assad’s escape, with no specific date announced for their resumption.

Conflicting figures, What is Syria’s foreign currency reserve?

The Syrian government is still conducting inventory and data collection operations, amid conflicting reports about what the Syrian Central Bank possesses in foreign currency, despite the consensus that foreign currency reserves have nearly diminished to zero.

On December 11, following one day of officially taking office, the head of the caretaker government in Syria, Mohammed al-Bashir, stated that only the Syrian pound, “which is worth nothing,” remains in the central bank’s coffers, explaining that the Syrian Central Bank has no foreign currency reserves.

Al-Bashir added in an interview with the Italian newspaper Corriere della Sera, “We do not have any foreign currency, and as for loans and bonds, we are still collecting data. So yes, we are in a very dire financial situation.”

Al-Bashir’s statements contradicted what Reuters reported from four unnamed sources described as “knowledgeable about the situation,” who said that the Syrian Central Bank still retains 26 tons of gold in its vaults, the same amount it held before the start of the Syrian revolution in March 2011.

However, Reuters sources confirmed that the bank possesses only a small amount of foreign currency reserves, totaling $200 million, while one source suggested the figure could be in the hundreds of millions, according to the agency.

The previous regime stopped exchanging financial information with the International Monetary Fund, the World Bank, and other international organizations shortly after al-Assad’s repression of peaceful protests.

Reuters did not receive a comment on the reserves from the caretaker government or the Syrian Central Bank management.

Reuters noted that the looting that affected the Central Bank following the fall of Bashar al-Assad’s regime on December 8 did not affect the main vault, which is bomb-resistant and requires three keys, held by three different individuals, along with a complex code to open it.

Billions in reserves disappear

Before 2011, Syria’s dollar and foreign currency reserves, as well as gold, were in their best condition.

According to statistics from the Federal Reserve Bank in St. Louis, the dollar reserves at the Syrian Central Bank were estimated at $5.6 billion in 2004, while the reserve value reached $18.5 billion in 2010.

The value of gold reserves at the Syrian Central Bank was 25.9 tons in 2004, and 25.8 tons in 2011, according to World Gold Council statistics.

The monetary reserve includes financial assets held by the Central Bank to support the stability of the national currency, ensure the settlement of international obligations, and provide liquidity in cases of economic crises. It typically consists of key elements such as foreign currencies, gold, special drawing rights, other foreign assets, local monetary reserves, and direct and indirect foreign investments.

Foreign deposits, Oil fields

Dr. Sulaiman Mouselli, a professor at Damascus University, believes that foreign currency deposits from supportive countries at this moment are crucial from an economic and psychological standpoint.

The situation hinges on the restoration of oil fields, at which point the need for foreign currency to finance oil imports would decrease. Additionally, transfers from expatriates will contribute to increasing the supply of foreign currency, and in the next phase, transit fees are expected to secure some resources, according to Mouselli in an interview with Enab Baladi.

The economics professor pointed out that Syria has shifted overnight from an economy of scarcity to a market economy, emphasizing that this shift should be accompanied by gradual and appropriate measures to restore market balance.

Mouselli explained that among these measures is to refrain from raising salaries by 300% all at once, instead opting for gradual increases, such as 100% each year. It is also important not to allow car imports at this stage, as that would deplete the already limited foreign currency reserves.

Selective customs duties should be imposed on luxury goods, and campaigns aimed at attracting foreign investment in the form of joint-stock companies should be launched, Mouselli believes.

Insufficient resources

Abdul Azim al-Mugharbel, assistant researcher at the Jusoor For Studies Center specializing in economic affairs, stated to Enab Baladi that the most prominent alternative sources for foreign currency currently will consist of external transfers, limited exports of certain agricultural and industrial products, revenues from crossings and ports, and some external support. However, these sources are insufficient to meet the state treasury’s needs due to their poor sustainability and the ongoing impact of sanctions.

Al-Mugharbel emphasized that the absence of ample foreign currency leads to instability in the Syrian pound, exacerbated inflation, weak domestic production, and thus the continuation of the living and economic crisis.

Transparency enhances assistance

Amidst the absence of accurate figures and regular statistics about what the state treasury contains, economic researcher and university professor Dr. Mokhles Nazer stated that the Syrian Central Bank should announce its balance sheet weekly, as central banks in advanced countries do.

This would encourage investors to invest in the new Syrian economy through trust and transparency, and it would provide constant information to experts for providing assistance.

The balance sheet of the central bank is a financial report showing the central bank’s financial position at a specific time, Nazer noted on Facebook, and it highlights the central bank’s key resources and obligations.

The balance sheet plays a crucial role in understanding the central bank’s policies, particularly concerning monetary policies and economic management.