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Syrian Currency Falls Following US Announcement Of More Unilateral Sanctions

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Syrian Currency Falls Following US Announcement Of More Unilateral Sanctions

US Treasury Department

Prices of food, medicine, and other basics are spiralling out of reach in Syrian markets as the local currency collapses in value, shortly before new unilateral US sanctions come into force.

The pound’s decline has accelerated since mid-October of last year when the financial crisis in neighbouring Lebanon choked off a main source of foreign currency inflows. International sanctions against Syria, damage to the country’s industry from the fighting, and an exodus of money by panicked Syrians had pushed the currency sharply lower during the conflict, now in its ninth year.

The value of the Syrian pound on the informal market has plunged from about 940 to the US dollar in January to a rate today of at least 3,000. And the rate of decline has been accelerating: it has more than halved in value since the beginning of May and dropped even faster in the last week.

Stiff penalties and a range of restrictions on unauthorised transactions and foreign currency dealings imposed by the Central Bank have not led to any levelling off of the rate. Its official price stands at 704.

Local media and Syrian diaspora reports say shops and pharmacies are keeping their doors shut because the value of the currency is dropping too fast for traders to set prices. Price rises of essentials including cooking gas, bread, and sugar – combined with increasingly worthless wages – are leading to public alarm and anger. At 2,000 Syrian pounds, a kilo of lemons is out of reach for a civil servant whose salary is now worth less than $20 a month.

As Syria enters its tenth year of civil war, more than 11 million people inside the country require humanitarian assistance, about half of whom are displaced from their original homes. Price rises are driving more people into poverty and food insecurity is rising, even in parts of the country relatively unaffected by the instability of recent years.

Before the latest crash, about a third of the population were not getting enough to eat, and 87% had no savings, according to a WFP survey in April. The price for a typical “reference” basket of food items such as flour, beans and oil representing a month’s supply had increased 111% in a year, according to WFP.

Inflation and shortages have led to new levels of poverty in government-controlled areas, while some areas controlled by opposition armed groups in the north have reportedly adopted the Turkish lira or dollar as alternatives to the Syrian pound.

The current economic crisis has multiple causes: the long civil war has exhausted all reserves Syria may have had; economic and political turmoil in Lebanon has seized up its dollar banking sector – used by Syrian importers and for the hard currency deposits of Syrian businesses; oil and gas production is barely functioning in Syrian government-held areas; the business empire of tycoon and al-Assad relative Rami Maklouf has been partially suspended; and Russia and Iran have limited capacity to offset the impact of the sanctions.

Analysts dispute whether the US sanctions, to be imposed pursuant to the so-called ‘Caesar Syria Civilian Protection Law’, are the primary cause of the present crash. Sanctions have already contributed to severe socio-economic impacts on the civilian population, despite being presented as highly targeted. The latest batch of sanctions is also designed to deter any foreign involvement in reconstruction of infrastructure damaged in the war, which includes civilian sites.

The sanctions penalise most transactions with the Syrian state and the supposed aim of the sanctions is to limit its military, construction projects, and the oil and gas industries. The measures, introduced in response to alleged repression and human rights abuses according to US officials, will start on 17 June.

There are no UN sanctions on the Syrian government itself or its leadership. However, sanctions by the United States and the EU have had a cumulative effect on humanitarian operations, and securing waivers to allow aid-related imports and bank transfers can be onerous: US banking and economic sanctions have squeezed out most trade with Syria. At the same time, Syria’s main supplier of fuel – including cooking gas – is Iran, and tighter US sanctions on shipping have limited those imports too. LINK

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