Has the exchange rate been 'liberalized' in Syria?

By Fouad Abdel Aziz

Many have read the decision of the Central Bank of the Syrian regime to issue a daily bulletin at the exchange rate of the remittance dollar, close to the black market rate, as a liberalization of the exchange rate of the pound or the beginning of a liberalization of its exchange rate, so to what extent is this statement true?

First of all, we must point out that most of the money transfer companies in Syria, several months before this decision was issued, used to receive remittances at a price close to the parallel market, and approximately with the same difference that appeared in the last bulletin issued by the Central Bank, when it determined the delivery price of remittance in dollar at 6,650 pounds for $1, while its price on the black market is about 6,950 pounds.

Therefore, it can be said, in short, that the recent decision of the Central Bank came to legitimize what the exchange companies were doing in violation of the law.

This is the only new thing in the matter. It is an official recognition of the black market price of the Syrian pound, and this will lead, in the next stage, to raising the official price of all hard currencies, in proportion to the real reality of it, which means, in one way or another, liberalization of the exchange rate, albeit partially.

In any case, in the Syrian reality, there is an incomprehensible issue, which is that money transfer companies will pay for incoming transfers in dollars, the price of 6,650 pounds, while the official dollar exchange rate in the Central Bank is 4,522 pounds.

Is it reasonable to sell these companies, which belong to the Private sector, to the central bank at this price? That is, with a loss of more than 2,000 pounds in every dollar?Especially since buying dollars and trading them in the Syrian market is considered a major crime punishable by law, in addition to the decision of the Central Bank itself, stressing that the remittance and exchange bulletin, which will be issued daily, includes the purchase price only, and there is no price for sale.

This raises several questions: Where will the exchange companies go with the dollars and the rest of the hard currencies that will accumulate in them from the remittances, which economic analysts expect to reach about $5 million per day?

Will the Central Bank buy these currencies and pay the difference to the exchange companies with a small margin of profit? As if he buys the dollar for 6,700 pounds, and thus he actually bears a loss of more than 2,000 pounds in each dollar compared to the official price.

The reality says that the central bank will not lose if it buys the dollar from the exchange companies at the previous price. On the contrary, it will remain profitable, because the price on the black market will remain higher, and this will help it build up a balance of hard currency, which it may use to finance its imports of wheat. And oil, for example, or to pump it later into the markets to control the exchange rate in the event that things got out of control.

So, what is certain is that the Syrian regime did not liberate the exchange rate of the lira or float it, because liberation means the possibility of buying and selling hard currencies in the local market, with complete freedom. It is allowed to sell it to citizens, and dealing in other than the Syrian pound is still considered a crime punishable by law.

The other question that comes to mind: Will the regime liberalize the exchange rate of the lira in the next stage..?

To answer this question, we sought help from the economist, Dr. Ismail Ammar, expert in monetary policy, and who indicated that the economic rule says: When any central bank goes bankrupt from hard currencies, the ready recipe is always the need to liberalize the exchange rate of the local currency, because the central bank does not exist and has something to lose, and he is essentially unable to control the money market.

 However, in the Syrian case, Dr. Ammar explains, in addition to the fact that the Central Bank is bankrupt, the country is isolated, internationally sanctioned, and economically besieged, and its people suffer from inflation and a poor level of income, and this Thus, he indicates that the decision to float the Syrian pound will only make the problem worse, and will allow a wealthy few to control the exchange rate according to their interests, and at the expense of the people's tragedy.

Therefore, the economist believes that the decision to float the currency needs political stability first, and economic stability second, in the sense that the government has a declared, clear and transparent economic vision and plans that it works on during a certain period of time, not a state whose people and merchants seek to escape from it at any price. As is the situation in Syria.

There remains a final note that must be mentioned, which is what the regime’s Minister of Economy made clear in explaining the Central Bank’s decision, as he confirmed the possibility of any citizen selling dollars to banks without being subjected to any accountability, contrary to the law that prohibits circulation in other than the Syrian pound, which prompted many to ask the minister What is the guarantee that he will not be arrested, as long as no law has been passed that overturns the previous law?

We confirm here that he will not be arrested, because the regime now wants dollars, even from under the ground. But beware, as a citizen, of asking or looking for dollars.