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 The pound has lost more than 90 percent of its value over the course
of five years of fighting, and the fall accelerated in recent weeks
since peace talks broke up in Geneva and fighting resumed in Aleppo
between rebels and government forces.
The currency, worth 47 to the dollar on the eve of the civil war,
now trades at around 635 to the dollar in Damascus and even higher
rates in other cities, having fallen by 20 percent in less than a
month, according to dealers reached by telephone.
Many Syrians have all but given up on the pound and use dollars for
day to day transactions, hoarding hard currency to protect their
savings.
Central Bank Governor Adeeb Mayaleh said on Wednesday he would do
what it takes to halt the fall. The bank had injected $10 million
into the market so far this week, he said.
"The rise in the dollar's exchange rate is not at all justified in
light of the Central Bank's knowledge of the demand for foreign
exchange and supply and the extent of liquidity in Syrian pounds,"
Mayaleh told state media.
"The dollar's exchange rate will see a big drop as the measures take
effect and speculators will suffer big losses," he said on
Wednesday. He also met with currency traders to discuss the plans.
One senior financier in Damascus said the $10 million injection
announced by Mayaleh so far was far too little to have an impact on
exchange rates.
"If these measures are not accompanied by other broader steps to
restore confidence we will see the pound hit the 700 benchmark
against the dollar before June," the financier told Reuters.
Two financial sources in the Syrian capital, who are not officials
but are familiar with government policy, said they understood the
bank was planning to spend $100 million supporting the currency in
coming days.
The bank aims to put the additional hard currency into circulation
by ordering each licensed currency exchange firm to sell up to $1
million in dollars to the public at a rate of 620 pounds to the
dollar. That would move the official rate closer to the black market
rate in a bid to drive black marketeers out of business.
FEAR ABOUT FUTURE
As fighting worsens in Aleppo and no signs of a political settlement
emerge, Syrians are less hopeful the economy will improve. The
crumbling of the currency has driven up inflation and aggravated
wartime hardship as Syrians struggle to afford basics such as food
and power. Government budget spending in pounds has more than
doubled, but in dollar terms has crashed.
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"There is now fear about the future of the pound due to lack of
trust in government measures along with a shrinking economy," said
one financial investor familiar with central bank moves who
requested anonymity.
The last rapid fall was when Russia announced it was reducing
military support for President Bashar al Assad in March. At the time
the pound traded at around 475 to the dollar.
Despite widespread devastation caused by the conflict and Western
sanctions imposed on Syria, the currency has so far escaped a
complete free fall. Assad's ally Iran is believed to have deposited
hundreds of millions of dollars into the country's depleted
reserves, which stood at $17 billion before the crisis.
A government crackdown on the currency black market had met some
success in the past in reining it in, but the effect was wearing off
now, one banker said.
Many people are reluctant to buy dollars through official channels,
even when available at a better rate than on the black market, for
fear they might be required to identify the source of their funds,
bankers and businessmen contacted by Reuters said.
"Unfortunately no one believes in buying from licensed firms and
most still ask for the dollars from the black market even if it
might be more expensive," said a currency dealer in the licensed
Hanifeh exchange in war-torn Aleppo city, who gave his first name as
Ahmad.
(Reporting by Suleiman Al-Khalidi; editing by Peter Graff)
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