Syrian Lira hit historic low against U.S. dollar

(Zaman Al Wasl)- The Syrian pound (Lira) on Monday has hit a historic low against the U.S. dollar to a record low of 1,050 pounds to the dollar.

The deteriorating and tragic exchange rate is caused by the Lebanese crisis where about $20 billions are locked up in the Lebanese banks, experts say.

"The Lebanese crisis closed a major door for Syria to get dollars," said a former Syrian banker who requested anonymity.

The true scale of Syria's dependency on Lebanon for greenbacks, needed to trade internationally, became more apparent as Lebanese banks ran out of dollars.

When the United States, the European Union and the United Nations imposed sanctions on Syria in the first year of its civil war in 2011, they were intended to financially squeeze the government of Bashar al-Assad.

In early 2016, the International Monetary Fund estimated that Syria had $1bn in foreign currency holdings, while the World Bank estimated them to be as low as $700m, down from $20bn in 2010.

The Syrian pound (SYP) meanwhile was on a slippery slope, depreciating from trading at 47 SYP to the US dollar in 2010 to 400 SYP by 2016.

By the beginning of 2019, the pound had reached 535 to the dollar, sliding to 663 SYP in October as Lebanon tightened up its foreign transfers and cracks in the Lebanese financial system started to show.

On 17 October, an uprising broke out in Lebanon, leading the banks to shut their doors for two weeks, subsequently imposing unofficial capital controls and limiting withdrawals in US dollars.

Just as Lebanon was caught up in the sanctions on Damascus, Syria became ensnared in the Lebanese financial crisis.

In mid-November the Syrian pound hit 822 to the dollar, and soon after, as the Lebanese banking sector limited withdrawals of dollars to $300 or less a week, it reached 1,000 SYP to the greenback.

"The financial pressure on Lebanon showed all the countries connected to the banking sector, and Syria was obviously very dependent on the Lebanese financial sector," a Lebanese compliance officer at a major bank said on condition of anonymity.

"Everyone knew that Syria was using Lebanon to evade the sanctions, the USA knew, so what has happened is not a surprise. They have billions tied up, and the immediate effect was the depreciation of the Syrian pound," he said.

The extent to which financial transfers were legitimate or not is unclear, with Lebanon only declaring the deposit figures of non-residents, without stating the breakdown by nationality.

Azzi said Syrians had billions of dollars in Lebanon, "but for the most part it is legitimate money".

On the illegitimate side, it was entities and people under sanctions who used Lebanon to gain access to international markets to buy goods, or, as the Financial Times reported in September, to buy real estate in Moscow through shell companies registered in Lebanese offshore bank accounts.

"Lebanon was used as a gateway through shell companies, service providers and third parties," said the former Syrian banker.

"Although [BDL governor] Salameh always said that Syrians were not using the banking sector, there are billions of dollars sitting in Lebanese banks, and Syrians want them back."

Syrian wealth is estimated at a fifth of what it was when the civil war broke out. The Global Wealth Report, issued by Swiss bank Credit Suisse, estimated Syrian total wealth at $21bn in mid-2019. At the end of 2010, it was around $117bn.

Syria and Lebanon are going to be further impacted by the passing of the Caesar Syria Civilian Protection Act by the US Senate in December.

The act, which still needs to be signed by President Donald Trump, imposes additional sanctions on Syria for war crimes.

(Zaman Al Wasl wit MEE)

Zaman Al Wasl