DAMASCUS – This installment of our monthly report from the Syrian capital looks at the surge in the value of the Syrian pound, Central Bank restrictions on foreign exchange activities, and attempts by the Syrian government to optimize the delivery of subsidized fuel to thousands of families.
Syrian Pound Surges
The official rate of the Syrian Pound (SYP) relative to the U.S. dollar saw a sharp rise in November, according to the Syria Report, an economic news digest.
Towards the end of November, the Central Bank traded the dollar at around 434 SYP – an improvement from earlier in the month (the official exchange was around 498 SYP on the dollar on November 5). This is an even wider fluctuation compared to last month, which had an official exchange rate of around 510 SYP per dollar.
According to the state-run news outlet SANA, Central Bank governor Dureid Dergham told reporters after a cabinet meeting addressing the issue that the new exchange rate would likely hold and should be taken as an optimistic sign for Syria’s situation.
The increase in the value of the SYP, according to the Syria Report, could translate into higher purchasing power and lower production costs for many Syrian households and businesses, especially if the current exchange rate holds. However, those who deal in dollars have been left scrambling.
The black market exchange rates also saw significant fluctuations in November, dropping from 484 SYP on the dollar early in the month to around 415 per dollar by November 28.
The Syrian Law Journal (SLJ) said that “the government is deliberating on a bill criminalizing the publication of black market rates of the Syrian pound that are contrary to the Central Bank rates.” Penalties could include a SYP 5 million fine and a minimum five-year prison sentence, according to the SLJ.
Central Bank Restricts Foreign Exchange Activities
In late October, shortly before the sharp rise in the SYP value, the Syrian government issued a number of financial regulations, including a limit of one foreign exchange purchase per month and $500 cap on foreign currency transfers for individuals, according to the Syrian Law Journal.
Funds that exceed this limit will be converted automatically into SYP and placed on a three-month hold in the beneficiary’s account. Withdrawing the deposit before will incur a 10 percent fee, 1 percent of which goes to the relevant bank and the remainder to the Central Bank. New regulations also limited transfers to one per month per individual.
These measures appear to be aimed at reducing the gap between the official foreign exchange rate and that offered on the black market to “deter speculative profiteering,” the SLJ reported.
Citing the Central Bank governor, the SLJ said that these regulations only applied to individuals and not to commercial companies. Hotels, United Nations agencies and the Aga Khan Development Network are purportedly exempt from these measures.
Winter Weather Woes
Winter has been an annual test of the government’s ability to subsidize and supply basic needs to citizens, such as electricity and fuel for cooking and heating, since it announced its gradual move toward a social market economy in 2005.
The conflict increased shortages of fuel and other basic necessities across the country. As a result, since 2011, the government has, at one time or another, delivered other products including gas cylinders (monthly for families and weekly for restaurants), cooking oil, sugar and even bread.
For the last few winters, families in Damascus generally received between 200 and 400 liters of subsidized fuel every year at between 30 to 40 percent lower than the market price. Public transport workers received fuel either weekly or daily for a lower price as well. This year’s prices are 180 SYP for families and transportation, and the market’s price is 293 SYP per liter, which is only a fraction of the cost of fuel in the besieged suburbs of Eastern Ghouta, 4,000 SYP per liter, according to OSOS, an independent organization that monitors prices in the area.
This process is usually run or supervised by local army or militia members. This year, however, the government is expected to implement a 10-year-old project that uses smart cards to organize delivery of heating oil. The new fuel distribution system aims to limit corruption in the delivery process.
In August, six centers opened in Damascus, where families could register for a smart card to replace the paper Family Register Document. Priority would be given to the families of wounded or dead Syrian soldiers, which amounts to around 1,118 families, according to the pro-government Alwatan newspaper.