Collapse of the Syrian Pound to Unprecedented Levels Against the US Dollar: Causes and Expectations
Jul 27, 2023 1985

Collapse of the Syrian Pound to Unprecedented Levels Against the US Dollar: Causes and Expectations

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At the beginning of 2023, the exchange rate of the Syrian pound against the US dollar started at around 7,000 Syrian pounds (SYP). It continued at this level with a slight decrease throughout the first quarter of the same year, then the pound began to collapse from May, as its value dropped from 8,500 to 10,000 against the US dollar by mid-July. 

Reviewing the condition of the Syrian pound since 2011, we notice that the path of collapse or its curve was gradual. The exchange rate began at 50 pounds per dollar and continued to rise in this manner. However, 2019 was a turning point for the pound when its rate reached 1,000 against the dollar, then 3,000 in 2020, and an average of 4,000 in 2022. These are relatively close percentage increases, with no actual economic support for the pound. Naturally, the Syrian regime’s central bank does not have any capacity to defend the pound, as neither the interest rate is effective, nor is there a desire to intervene to purchase the pound, and there is no real banking system in Syria. Eventually, the trust in the central bank institution has declined to an unprecedented level. 

On the other hand, it is noted that the policies of the The Syrian Monetary and Credit Council and its central partner, as well as the policies of the Ministry of Finance, are generally inconsistent with each other and do not indicate any desire to control the pound's rate. For example, the Central Bank raised the interest rate to 11% in mid-2022, then pumped a large amount of money into the markets at the beginning of 2023. It is observed that the Central Bank has raised the exchange rate of remittances several times in order to keep up with the market and suck the largest amount of foreign currencies transferred to Syria, which is the main goal of the work of the Syrian Central Bank. 

Somehow, the Syrian regime is trying to send a message to Arab countries through the exchange rate of the pound - mainly after normalizing relations with it-that the conditions in Syria are deteriorating and are increasingly worsening, which the Arab leaders focused on to explain the normalization step. 

In an unstable and volatile environment, it is difficult to predict the exchange rate of the Syrian pound, but the natural course for the pound is a downward trend in terms of value, and therefore further rise in the exchange rate. The clear unwillingness of the Central Bank in 2023 to control the pound's rate encourages the decrease in the pound's price. It is also observed that the price of the pound may stabilize, but it declines sharply with any shock, as it lacks the fundamentals of resilience. 

Therefore, the regime is unwilling to control the exchange rate of the pound, but rather to gather more foreign currencies, and there are no real financial or monetary capabilities to control the price. The deterioration of conditions may work in favor of calling Arab and international decision-makers to intervene in Syria in cooperation with the regime. Therefore, it is expected that the exchange rate of the pound will continue to deteriorate until the end of 2023, with the possibility of stabilizing during the current summer and until the beginning of winter.