MESOP Syria Feature: How Low Can the Currency Go?

by Scott Lucas – eaworldview – 19 March 2016 – Syrian Pound is now 475 to the US dollar – Syria’s currency, in decline throughout the five-year conflict, has slid further to only 10% of its pre-war value.

The Syrian pound is now 475 to the US dollar on the black market, compared to 47 to the dollar in March 2011. The official rate is about 407 to the dollar.Reports indicate that Vladimir Putin’s surprise declaration of a withdrawal of most Russian forces has spurred another drop.“In the last few days it came under further pressure because of the Russian announcement,” a Damascus-based businessman said. “There was a lot of panic”.The decline could have been even worse in the past had it not been for hundreds of millions of dollars of Iranian support for foreign reserves, as well as remittances from Syrians working abroad.The Assad regime has also tried to limit the black market and control currency exchanges to close the gap between official and unofficial rates.However, the regime is finding that more Syrian traders are switching their financing into foreign currency, as billions of dollars of international humanitarian aid have entered the country.“The Syrian economy has been dollarised — the import side and the financing side, along with savings and the aid coming from outside,” financial consultant Hani al-Khoury said.

Combined with the continued pressures caused by the war, this means that the pound “is bound to continue to gradually drop”, Khoury said. The currency has been further destabilized by the fragmentation of the country.“In every street in Damascus there is a different rate,” the Damascus businessman said. “In Homs, Aleppo, Damascus, the black market rate varies.”Syria’s GDP has been curbed 45% by the war. The estimated cost of the war to Syria’s GDP is $275 billion, with a projected financial impact of $1.3 trillion by 2020.