Syria (barely) survived a civil war. Can it weather the latest financial crisis?

A Syrian man holds up a 2,000-pound banknote, featuring President Bashar Assad, in front of damaged buildings, in Duma, Syria, in 2017.
A Syrian man holds up a 2,000-pound banknote, featuring President Bashar Assad, in front of damaged buildings, in Duma, Syria, in 2017.
(Mohammed Badra / EPA)

A devastating war, relentless sanctions, a gutted economy under siege: All these have ground the Syrian pound down to a tenth of its value since the outbreak of the civil war in 2011.

But it’s the anti-government protests in neighboring Lebanon that may deliver the finishing blow to the pound. This week, it nose-dived to its lowest level against the U.S. dollar since it began trading in 1919, threatening the collapse of Syrian President Bashar Assad’s government even as he and his allies have largely won the almost nine-year civil war.

The pound had traded at 47 to the dollar before the war. By the end of last year, it had reached 500. It now hovers around 765, with much of the loss occurring in the last two months.


Put another way: 100 Syrian pounds were worth about $2 in 2011. That same currency would be worth about 13 cents now.

The result has been grocery prices that change — almost always upward— with every passing day. Many Syrians have been forced to take on two or three jobs to keep food on their tables; shortages of staples and essential products such as medicines, rice and flour are expected to hit soon.

The pound’s latest downturn, analysts say, comes from the financial contretemps hitting Lebanon. In mid-October, more than a quarter of the country’s 4 million people swarmed the streets to protest decades of colossal mismanagement by their leaders. Lebanese banks, fearing a run on currency, shuttered their doors. Weeks later, they’ve reopened but with tight limits. Spending on goods outside Lebanon is capped at $150 per month, and dollar transactions in the country are largely restricted.

The measures have left millions of depositors stranded, among them Syrians who have used Lebanon to circumvent far-ranging U.S. and European Union sanctions on the government of Assad as well as those of his allies in Iran and Hezbollah, the Lebanese Shiite paramilitary group and political party.

Along Beirut’s seaside corniche, Ferrari drivers rev their engines as they sidle past white-clad guards at the St.

April 27, 2019

With the Syrian central bank under sanctions, along with much of the state’s businesses, many importers used Lebanon’s banking system as a conduit for their trade.

“What does a Syrian merchant who wants those dollars now do? He gets some from the black market here, and some in the black market in Syria,” said Jihad Yazigi, founder and editor of the Syrian Report, a weekly economic digest, in a phone interview on Tuesday.


“That’s putting pressure on the Syrian pound, and the decline of both currencies go together.”

The restrictions have also prevented Syrians from repatriating funds (much of them remittances) from Lebanese banks back to Syria, according to the Syrian Law Journal, an online publication covering the country’s legal and economic issues.

There is no full accounting of the size of Syrian deposits in Lebanon’s banks, but estimates put them at some $30 billion, almost a fifth of all deposits in the country.

For months, officials have blamed the pound’s performance on the sanctions that have all but choked off Syria’s economy, part of what the country’s central bank governor said in an interview with state media in June was a “systematic campaign to undermine the [Syrian pound] and push people to abandon their national currency.”

But the dismal conditions have emboldened domestic critics, even in the country’s usually docile parliament, to excoriate the government for its lackluster response, even as they call for a wide-scale crackdown on corruption benefiting those they describe as parasites and cronies close to the ruling class.

“Is it reasonable for Syrians to go to fortune tellers so they know where the exchange rate is heading?” said a member of parliament, Alan Bakr, in a contentious legislative session on Monday, according to a report from the pro-government Al Watan daily.


He added the government had “no initiatives and no vision” to present to Syrian citizens who had been patient during the war.

That patience has been sorely tested. The civil war, which has killed an estimated 500,000 people (official tallies have long been suspended) and left millions as refugees, has also ravaged industrial powerhouses around Aleppo and Damascus. It has left an economy with a GDP a third of the size it was in 2010.

Assad and his Russian allies have declared the war to be essentially over, with the government as the victor. But victory hasn’t ushered in a long-promised reconstruction bonanza, and a windfall from reopening trade routes with countries in the region hasn’t materialized. Meanwhile, some 90% of the country is under the poverty line, according to the Syrian Center for Policy Research. With money buying fewer goods every day, and the government unable to manage structural reforms, it’s unclear how long authorities can contain the discontent.

The conflict has also left the state starved for dollars to accommodate a rising need for imports. Its main sources of hard currency were tourism — now virtually nonexistent — and oil, which is now controlled by the U.S. The trade deficit, said the Observatory of Economic Complexity, an economic data organization, has ballooned to $3.8 billion.

In the past, the central bank had countered successive devaluations of the pound by selling dollars to local money changers at the official rate of 435. But it no longer has enough dollars for such interventions, Yazigi said. Syria’s foreign currency reserves have dwindled to a scant $200 million, according to estimates, while oil exports and a credit line from Iran have also tumbled.

One attempt to stave off growing discontent was a 20,000-pound increase in monthly state salaries (roughly $27, the largest salary hike in the country’s history) announced by Assad earlier this month.


The government has chased after black market money exchangers as well as traders for price-gouging, even as it has moved to restrict imports and reduce the money available for outside transactions, the Syrian Law Journal reported.

But the currency’s plunge has hurt local producers as well. Most rely on materials imported from abroad for their products. Meanwhile, the prices of basic goods, including medicines, are often set by the government, meaning they’re often sold at a loss.

“When I sell in Syrian pounds, I’m making a profit, but to get any of the primary materials I need for production, which I pay for in dollars, it’s a problem,” said Ziad Oubari, an owner of a pharmaceutical company, in a phone interview Tuesday. He added that if the situation didn’t change, he and others would have to reduce the variety of medicines they offered.

“It’s gotten to the point where you almost don’t want the customer to buy something because its price is so much lower than the cost,” he said.