* Central bank pledge to act fails to materialise
* Bank governor: dollar's rise "artificial", due to
* Demand for foreign currency remains high in Syria
By Suleiman Al-Khalidi
AMMAN, March 27 A pledge by Syria's central bank
on Sunday to take action to support the pound is already looking
hollow, raising speculation the authorities may no longer be
willing to burn up reserves defending the currency.
The pound has plunged by nearly a quarter this month against
the dollar since rebels seized vast areas of the oil-rich
northeast region, prompting more Syrians, fearful of the
economic outlook, to convert pounds into foreign currency.
The pound, which is only traded in Syria and neighbouring
Jordan and Lebanon and mostly on the black market, hit a record
low of 226 to the dollar last Wednesday on the black market and
has stayed close to that level this week, local financial
sources said on Wednesday.
Central bank Governor Adeeb Mayaleh, in an interview on
Sunday, blamed the pound's fall in the black market on
speculators, whom he compared to insurgents waging a war against
his sanctions-hit country. He vowed to take action to support
"People once they get a bit more afraid rush to change
their pounds into foreign currency. There is no economic factor
at play, it's just psychological. There are many measures we
will take to help the pound recover," Mayaleh said in the
interview on state television.
He did not elaborate on what those measures might be and the
absence of any action this week to halt the pound's slide has
sparked rumours that the central bank is now prepared to let the
Defending it would mean burning up more foreign currency
reserves, which have been depleted by a slump in tourism and oil
revenues and by previous efforts to prop up the currency.
Syria's foreign reserves were estimated by officials and
independent economists at $17 billion before the uprising
against President Bashar al-Assad's rule began two years ago.
Some bankers estimate they are now as low as $4 billion.
On Tuesday Mayaleh met licensed exchange dealers and
financial institutions, but there was no public announcement
after the meeting, adding to market speculation that action was
"After Mayaleh's first appearance in months and his outward
confidence, people were expecting strong intervention but this
has not materialised, worsening the pound's plight," a dealer at
one of the 30 leading licensed exchange houses in Damascus said
After being relatively stable for months, the pound has
fallen sharply since rebels seized the provincial city of Riqqa
in eastern Syria on March 4, giving them control of much of the
northeast region, home to all of the country's oil production
and most of its grain output.
Several currency dealers in Damascus contacted by telephone
said the pound was trading between 115 and 120 to the dollar on
Wednesday on the black market, while the official rate was 97 to
the dollar. Exchange dealers in Jordan and Lebanon use rates
close to black market rates in Syria.
Paradoxically, dollars finding their way into rebel-held
areas of Syria is preventing a faster fall in the pound.
LOCAL CURRENCY BONDS
Civil war now rages in most of Syria's provinces and the
United Nations says 70,000 people have been killed. Bankers and
dealers said the pound has lost more than half of its value
since the uprising began in 2011, when the currency stood at 47
pounds to the dollar.
The central bank's decision in January last year to allow
private banks and exchange dealers to sell dollars at rates
closer to black market prices was no longer stabilising the
market, with few banks or exchange dealers now willing to sell
scarce foreign currency.
Syrians worried about the growing violence and the shrinking
value of their local currency savings, and pessimistic about a
political breakthrough, have hoarded more dollars in recent
weeks, exchange dealers say.
Mayaleh said on Sunday that the monetary authorities were
planning soon to offer local currency bonds at high interest
rates beyond the current 10 percent. Bankers, however, said that
such bonds would not be attractive at a time of deep uncertainty
about the future.
"We want to compensate people for the losses of the gradual
fall in the pound since the crisis. The high interest rates on
such certificates will cushion people's purchasing power,"
If the authorities have resigned themselves to a sustained
fall in the currency, as bankers believe, that will add pressure
on Damascus's already dwindling financial resources and its
ability to continue to withstand sanctions imposed by Western
It would also aggravate the hardship of the Syrian people by
boosting inflation, which is now officially running at around 40
percent but probably is much higher, independent economists say.
Last year, the authorities injected at least five to 10
million dollars daily to help shore up the currency.
"With the crisis deepening, few bankers expect the central
bank to put a strong defence despite all the talk on how
important the pound's strength is to the economy," said a banker
at the Damascus subsidiary of a foreign bank.
Bankers now believe the central bank is more concerned with
conserving its increasingly scarce foreign reserves - whose low
levels have already forced Damascus to barter deals with Iran,
Ukraine and Iraq to secure basic commodities - than with
protecting the currency.
"The impact of two years of conflict are now clearly visible
in the way the pound is being more and more left to its own
devices. We are bracing for a period of wider fluctuations than
stability," the banker said.