Enab Baladi – Lama Diab

The issue of liquidity being locked in the Central Bank of Syria (CBS) has sparked controversy among citizens, as it negatively impacts their purchasing power.

Citizens interviewed by Enab Baladi said they could not withdraw financial amounts from their bank accounts due to the lack of liquidity in banks.

Private banks do not allow citizens to withdraw their money or salaries that are transferred to their personal accounts.

This procedure disrupts the flow of money, leading to a decrease in economic and investment activity.

Daily withdrawal ceiling

Some private banks have set a daily withdrawal ceiling of 250,000 Syrian pounds, which is insufficient to secure essential family needs.

This means that cash liquidity in Syrian currency is held by the central bank and private banks, which affects individuals who have to liquidate their savings.

Citizens convert what they have saved in foreign currency (dollars) or remittances coming from abroad, even at a price lower than the rate set by the Central Bank of Syria.

However, licensed exchange companies have closed their doors in recent days due to fluctuations in the exchange rate of the dollar against the Syrian pound.

Meanwhile, unlicensed mobile exchangers are spreading in the streets of Damascus, especially in the Sabaa Bahrat Square opposite the Central Bank of Syria, working without oversight.

Some traders resort to discounts or offers on various items, whether food or clothing, to collect money that helps them pay monthly obligations for shop rent and workers’ wages.

Liquidity locking halts production

Academic and economic expert Firas Shaabo said to Enab Baladi that locking liquidity halts the production wheel; in economic terms, we call this “killing demand,” meaning that when liquidity is withdrawn from the market, demand is directed only towards priorities.

When consumption declines due to locked liquidity, sales stop, leading to the inability of traders or manufacturers to cover their production costs, according to Shaabo. When they turn to liquidate dollars, it becomes a catastrophe because locking the pound has significantly reduced the value of the dollar, thereby raising production costs.

As for individuals, they have been affected as their savings have diminished; for example, a person who had $10,000 previously equivalent to around 150 million Syrian pounds is now equivalent to about 100 million Syrian pounds or less, while prices have not actually decreased.

Regarding necessary measures, Shaabo stated that liquidity should be injected gradually and bank withdrawal operations and balances facilitated to restart the economy, as government spending is at its lowest, which also contributes to locking liquidity. State institutions should operate, and the withdrawal of deposits should be allowed as it is the right of every individual.

Furthermore, the funds from the import finance platform, estimated at around 1.5 trillion Syrian pounds, should return to their owners, a significant figure. However, these steps should be gradual; continuing in this situation could cause the exchange rate to rise to high levels, according to Shaabo.

No information on the size of the monetary mass

Regarding the closure of exchange companies, Shaabo pointed out that the Central Bank of Syria has required a deposit of $20 million from exchange and remittance companies in exchange for obtaining a working license, while a deposit of $1 million is required for exchange offices’ licensing.

Owners of these companies objected to this decision amid discussions about the matter, Shaabo explained, indicating that their closure would open the door for influential figures to manipulate the exchange rate.

The Central Bank of Syria issued a circular on February 5 regarding the sale of foreign currency to licensed banks allowed to deal in foreign currency.

This allows banks to sell US dollars related to the obligations of importers financed through the import finance platform, and the banks can conduct operations to sell dollars based on the customer’s account, deducting Syrian pounds from that account equivalent to the transferred amount using the exchange rate provided in the circular issued by the bank on the date of the sale.

Commenting on the decision, Shaabo explained that this is a positive step that leads to stimulating economic activity, and we need further steps to instill confidence in the Syrian market.

As for liquidity locking, part of it was a priority in the current phase, while another part is organizational and administrative, as the new government received the bank almost empty of funds, and there were concerns about activating certain accounts linked to the security or financial arms of the previous regime. Hence, they attempted to restrict account movements and halt all government expenditures, according to Shaabo.

Liquidity is one of the fundamental elements that ensure the economy’s stability and growth, at a time when most Syrians find it hard to access the money they need for daily transactions.

Controlling the monetary mass in the market is very important, as this helps to ascertain the actual exchange rate and many other procedures if the government intends to change the currency. There is no information about the size of the monetary mass of the Syrian currency in the market, according to Shaabo.

Strong institutions represented by the Central Bank of Syria, capable of oversight and executing transactions (selling, buying) according to its issued pricing, are needed to oversee the exchange process. Currently, the bank’s work is limited to issuing the official bulletin only.

Shaabo concluded that relieving the sanctions imposed on Syria will allow for the organization of internal banking affairs since sanctions hinder the operations of banks.

The purchasing power of citizens has declined, despite improvements in the Syrian pound’s value, as prices remain high compared to monthly income, exacerbating living conditions.

The purchasing power of citizens is linked to the exchange rate of the currency and the inflation rate in the country; as the inflation rate rises, the number of goods and services that can be purchased with a monetary unit decreases, and as the currency value rises, purchasing power increases, and vice versa.

The Central Bank of Syria directed the day after the collapse of the previous regime a message to Syrians dealing with all operating banks, assuring them that their deposits and funds in those banks are safe and will not be harmed.