Syria’s Currency Plunges, Raising Fears Of Economic Chaos And Poverty – OpEd
By Syria Comment - Joshua Landis
The exchange rate of the Syrian Pound has reportedly plunged to the 103 range against the dollar at mid-day Wednesday, March 7th, 2012 in Damascus. This is a loss of over 100% since the beginning of the uprising. Over the last month, the pound has begun to weaken significantly which has received little attention. The 100 mark is an important psychological barrier.
Syrian businessmen are taking large losses. Most rely on account receivables when they sell their goods. This means that traders who have sold goods over the last half year in Syrian pounds are taking heavy losses when they are paid back.
One businessman I spoke to this morning reports that he sold three-hundred thousand dollars of car parts several months ago in Syrian pounds. He is to be paid at the end of this month. Due to the decline of the pound over this time period from 57 to 100 pounds per dollar, he will lose close to $150,000 dollars. This is a crushing blow to business.
No one is trading the Syrian pound today because its price is decreasing every hour. No one has any idea where this might end.
The Central Bank had continually threatened that it would punish black market speculators by intervening in support of the Syrian currency, but it has not actually done this over the last few months. People have come to understand that Central Bank threats are empty. Hence the currency is collapsing. The Central Bank has not committed its reserves to defend the pound.
Most of the savings of Syrians were in Syrian pounds because the Central Bank offered high interest rates compared to the more liquid currencies which were offering rates near zero. Syrians placed confidence in the pound because it had been stable for many years. The public has been hit hard by the decline of the pound. Most Syrians are losing their life savings. Many have neglected to move out of Syrian pounds because it is against the law and because they calculated that the political climate might improve.
People are talking about an impending resignation of the head of the Central Bank, Adib Mayaleh. There has been no official confirmation of this. One cannot be sure whether changing the head of the central bank would improve the situation, unless the Syrian leadership decides to support the pound with the country’s remaining reserves.
