Syria’s Currency Crisis

The war has finally reached the wallets of Syria's middle class

On an afternoon that is so hot it’s almost unbearable, the customers still crowd into Hasan’s tiny shop, exchanging handfuls of notes with the two men sitting behind the counter. Next to them, a computer screen dictates their deals. Today, they can exchange one US dollar for 255 Syrian pounds. Yesterday, the rate was 300. Nobody can guess what exchange rate the computer screen will be displaying tomorrow.

 

“Before the uprising the currency was stable,” says Hasan. “It was 47 Syrian pounds to the dollar, and it barely went up or down. But in the past month, the Syrian currency has collapsed. When it was at its weakest a few weeks ago, we were selling 347 Syrian pounds to the dollar.”

 

It took a long time for the war to reach the wallets of Syria’s middle class: this currency crisis has slowly crept up on them. First the price of fuel started to rise as the regime cut off the supplies to rebel-held areas. All of Aleppo’s gas stations have closed, and most of the forecourt structures have been caved in by shelling for good measure. Now the fuel comes from oilfields in the east of Syria that have been captured by the rebel brigades. Like everyone else in the city, we fill our tank from a jerrycan on the side of the road, but this fuel comes at an inflated price. Two years ago, one liter cost 44 Syrian pounds; today we pay 325 Syrian pounds per liter.

 

The rocketing fuel prices trickled down. As they rose, so too did the cost of food; it has to be transported from the countryside into urban areas like Aleppo and so food prices in the city are always dependent on the cost of petrol. Although the shawarma and kebab shops are still open for business, they mask the desperation of the poorest Syrians who are stuck in a country where they can no longer afford to eat. A packet of bread that used to cost 15 Syrian pounds now costs 130. Some people have gone to the refugee camps, where they are given a daily food parcel. Some eat just one meal a day. Some are selling off their possessions, piece by piece. “No-one can afford to buy anything but food anymore,” one Aleppine tells me. Most of the shops that sell consumer goods have closed in the opposition-held areas of Aleppo, but the few that remain open are empty except for the shop attendants, their bored expressions testament to his words.

 

And then the business owners fled. In Aleppo’s industrial area, once home to the biggest concentration of manufacturing companies in Syria, we drive through street after street of factories that have been stripped of equipment and left deserted. There used to be over a thousand businesses based here, and even the smallest of them would employ around two hundred people. But as the crisis deepened their owners moved them to Turkey, or to Egypt, or to anywhere where they could be sure that they would not be bombed out of business. And all the people who worked for them, maybe two hundred thousand in all, lost their jobs and their incomes, compounding their misery still further.

 

After the businesses closed down, so too did the banks. Their headquarters occupy one small corner of the industrial zone and they are also deserted and have been looted for their fittings. One bank’s headquarters has been requisitioned and turned into a media office by a rebel brigade. A group of fighters sprawl out, asleep, next to the water cooler when we visit for an interview: the cashiers will not be coming back any time soon.

 

And yet somehow the Syrian currency stayed relatively buoyant until three months ago, when all of these factors suddenly conspired to create a devastating monetary collapse. Ahmad used to work in a company that imported electrical goods into Syria from abroad, and he believes that the tipping point came when the rebels started to attack Damascus. “That was the moment when my boss decided to move his business out of Syria,” he says. “He transferred USD 2 million out of the country via Turkish banks. And we are just a small company. Many others decided to do the same.”

 

In Hasan’s exchange office I meet Abdul Latif. He worked in an Aleppo branch of Syria’s central bank for twenty years, but says that one year ago the regime emptied all of the bank’s reserves. “They transferred around USD 14 million from the central bank in Aleppo to the central bank in Damascus,” he says. “They transferred everything—Syrian pounds, dollars, Euros, and all the gold reserves. It was clear that they were expecting Aleppo to fall to the opposition.”

 

At the same time, the government was monitoring how money was leaving the country. “Every day, I had to check what was being transferred out of Syria,” he says. “If there were big amounts going out in one go, then we had to investigate it. The regime knew that if the big businessmen left then the currency would collapse.”

 

And so it has happens. “There is a famous Arabic proverb,” says Ahmad. “It says that money runs before men.” So although the streets of Aleppo are still bustling with people, the city’s commerce has stuttered to a halt. There are virtually no imports or exports anymore, and anyone who has any savings left has transferred them to foreign banks. Merchants are now doing their business deals in dollars.

 

And yet the Syrian pound is still the currency of the street. To buy food or cigarettes or fuel, we have to exchange our dollars at shops like Hasan’s, at the mercy of the careering exchange rate. But Hassan believes that the continuing ubiquity of the collapsing pound is due to one very simple reason: “The currency exchanges only have hundred dollar bill in stock,” he says. “Ordinary people don’t have enough money to buy them, so they are still using the Syrian pound. Maybe if we start getting fives, tens or twenty dollar bills, the people will start using them instead.”

 

From his computer screen, Hasan thinks he has worked out why and when the currency fluctuations happen. “Whenever the rebels take control of a new area, the dollar rises against the pound,” he says. “But the dollar goes down when the rebels bring money from outside and start spending it in Syria.” In recent days he says he has seen an influx of people who come to change Euros. “I think the dollars are coming from donors in the Gulf States, so maybe this money is coming from donors in Russia and the European Union. Or maybe the central bank only has Euros left in its reserves.”

 

The signs from Hasan’s shop appear gloomy. The people who did not exchange their savings for a foreign currency before the collapse have seen them decimated, and the poorest people, who were already in a desperate situation, are seeing their predicament worsen further. But Abdul Latif, with his twenty years of financial experience, believes that the outlook could be better than it seems. “Maybe the currency in the future will be even stronger than it was,” he says. “Like Libya, I think it will recover after the crisis. But first, Assad has to be defeated.”

 

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