AMMAN: Syria’s central bank has largely abandoned efforts to support the value of its currency in order to protect its remaining foreign exchange reserves, which have been slashed by the country’s civil war, bankers and analysts say.
For the first two years after the uprising against President Bashar Al Assad began in early 2011, the government forced private banks to sell their supplies of foreign currency at exchange rates which it determined. This allowed authorities to slow the depreciation of the Syrian pound. But to meet demand for US dollars at its artificial rates, the central bank was forced to run down its reserves.
This month, the central bank has begun allowing commercial banks and licenced foreign exchange dealers to sell dollars at rates of their choice - a risky move which will reduce the drain on Syria’s reserves, but could expose its currency to fresh downward pressure.
Samir Seifan, a prominent Syrian economist who now lives abroad but worked before the uprising for state-linked think tanks in Syria, said authorities had previously been engineering a deliberate depreciation of the pound, but were now being forced to sit back as it fell.
Before the uprising began, the Syrian pound traded at roughly 46 to the dollar. International sanctions against the Syrian government, damage to the country’s industry from the fighting, and panicked Syrians sending their money abroad have pushed the currency down sharply. It hit a record low of 126 last month and has traded in a range of around 115-120 this month.
Before the uprising began the Syrian central bank’s foreign reserves, which are a closely guarded official secret, were estimated by the International Monetary Fund at about $18bn. Central Bank Governor Adeeb Mayaleh, in an interview with Reuters this week, said estimates by some private analysts that reserves had dropped as low as $4bn were incorrect. But Mayaleh declined to give a specific figure.
The central bank still provides dollars for the import of 21 essential goods into Syria at a preferential rate at least 20 percent lower than the market rate, but otherwise it is largely letting market forces operate, bankers said.
Another banker, who attended a meeting with Mayaleh this month where the issue was discussed, said the country had essentially moved to a “managed float” of its currency, in which the central bank would sell or buy dollars to limit sharp fluctuations but would not try to determine the pound’s underlying value.
Reuters
