The new 2,000 Syrian pound banknote carries a purple portrait of the Grand Umayyad Mosque on the front, next to an image of Bashar Al Assad. Image Credit: Sami Moubayed/Gulf News

Damascus: The Syrian lira seems to be falling from one pitfall to another, trading at almost 790 SP to the US dollar.

This has caused unprecedented havoc in Syria, as the population’s already razor-thin savings lose yet another chunk of their value, after nearly nine years of war.

Many analysts expect it to cross the 1,000 SP benchmark within the next few months, although in September, it stood at just above 600 SP to the US dollar.

This is the worst–and quickest—devaluation ever in the modern history of Syria, and it is largely linked to what is happening in neighbouring Lebanon.

The Lebanese banking system has historically been a safe haven for Syrian businessmen, who preferred depositing their savings into Lebanese banks, which were more secure and less regulated than those in Syria.

Now with dollars in scarcity in Lebanon, Syrian businessmen have had their accounts locked in Beirut, preventing them from withdrawing more than $1,000 USD a week.

And with some commercial banks, the limit is just $500 USD per week.

They still have the option of withdrawing their money in Lebanese pounds, whose value has dropped from 1,500 LP to the US dollar in mid-October, to 2,000 LB as of late November.

But even then, they can only withdraw 1 million Lebanese pounds per day, if in person, or 1.5 million through ATMs, which are also short on money.

To move ahead with their imports and exports, Syrian business figures have turned to the local black market at home, buying and transferring dollars abroad to keep up the trade, at hugely inflated prices. That was topped with Lebanese citizens buying dollars from the Syrian market to meet their needs, also greatly affecting the exchange rate.

How bad is it?

Very. George Saghir, a New York based Syrian economist, told Gulf News: “The situation is dire; the dollars are gone. They are now a very scarce commodity in Lebanon.

The only solution for Syria is to build firewalls around their remaining dollars, like preventing their sale to Lebanon. From here on, the Syrian pound will mimic that of Lebanon, which continues to grow weaker.”

What has the Syrian government done about it?

For starters, Syrian authorities have started a clampdown on money exchangers throughout the country, throwing many in jail.

That came a special fund “to save the lira” set up by leading Syrian businessmen last September.

At a much-publicized event at the Sheraton Hotel, they donated money in US dollars to the Syrian treasury, which were automatically switched to Syrian pounds, to raise the local currency’s value.

Business magnet Samer Foz solely came up with $10 million USD but it had little or no influence at solving the problem.

Despite the initiative, the exchange rate continued to rise.

The Syrian government then issued legislation, raising the salary of state employees by 20,000 SP ($25 USD) and monthly pensions by 16,000 SP ($20 USD), hoping to accommodate the angry street.

They then banned the import of any foreign commodity that is paid for in US dollars, unless there is no Syrian made alternative on the market. Syrian importers could now no longer import chocolate, alcohol, designer brands, or cosmetics from abroad.

Such imports were always made through credit lines in US dollars, devouring the country’s reserve of foreign currency. That too did little to solve the problem, as businessmen turned to smuggling to meet their needs, whether from Lebanon or Jordan, and even Turkey.

“The price of foodstuff has increased dramatically, higher than the actual depreciation of the Syrian currency” said Amer Elias, a Damascus-based analyst. That has led merchants to simply stop selling and manufacturers to stop producing, unable to price their goods or determine their margin of profit, due to the fluctuating market rates.

Meanwhile, the official rate at the Central Bank of Syria still stands at a mythical 435 SP to the US dollar.

“The government’s complete silence over what’s happening can only be described as a deficit” he added to Gulf News, “topped of course, with a complete lack of vision.”

But, apart from the Lebanon crisis, the devaluation of the Syrian pound has already been triggered by two other important developments:

Government control of rebel areas

“One reason is the return of government control to former opposition areas in the Syrian south and East Ghouta” said Ebraheem Hamidi, senior diplomatic editor at the London-based Alsharq Alawsat.

Speaking to Gulf News, he explained: “Those areas were a source of foreign currency income, due to the steady financial support they were getting from the West. Suddenly, that source of dollars dried up.”

The government has restored control over most opposition-held areas of the country. Image Credit: Reuters

Those dollars had often found their way into government-held areas, always in abundance, and their presence bolstered the Syrian pound.

Before government troops retook East Aleppo for example, back in December 2016, the exchange rate was 533 SP to the US dollar.

After the armed opposition were evacuated to Idlib in the Syrian northwest, the exchange rate first hit the 600 SP benchmark, but it was quickly reduced by government authorities, who drowned the market with local currency, to raise its value.

Fear in the business community

The second reason seems to be the amount of unsolicited rumors that ripped through Damascus since early September, about big business names and warlords earmarked for termination in what is being peddled by the government as an “anti-corruption campaign.”

First on the target list was Rami Makhhlouf, the president’s cousin, making many smaller businessmen and profiteers feel unsafe.

Those rumors were never backed by a coherent statement from Syrian authorities, causing many to panic.

Fearing that their property would be confiscated, or that their bank accounts seized, an unknown number of businessmen rapidly converted their Syrian savings into US dollars—seemingly in very large quantities—greatly damaging the value of the Syrian pound.

Within ten days, billions of Syrian pounds were abandoned and smuggled or wired to Lebanon, where they mistakenly believed their money would be safer.