June 1, 2023

In an unprecedented step, the Central Bank of the Syrian regime announced the reduction of the exchange rate of the local currency, the “lira,” to equal its value on the black market, with regard to transfers.

The Central Bank said in a statement last Thursday that it had decided to lower the official exchange rate to 6,650 pounds per US dollar.

During the past five months, the Central Bank reduced the local exchange rate 3 times, during which it reduced the exchange rate from 2814 pounds to 4552 per dollar, but it remained below the trading price.

This is the first time that the central bank has reduced the exchange rate of the lira to equal the trading price, since the start of the war in Syria 10 years ago.

The decision comes after the devaluation of the lira to record levels and a severe economic crisis in the areas controlled by the regime, which began looking for new financial resources to finance its purchases.

The economic crisis in the areas of the regime is represented by a shortage of oil derivatives, a rise in poverty rates to 90 percent, the cessation of production and industry, and the inability to provide electricity except for a few hours.

With the decline in the exchange rate, the average monthly wage fell to about $20, which is not enough for one family. There is a period of more than two days, at best.

The decision to lower the price of the lira came shortly after US President Joe Biden signed the defense budget for 2023, which includes the “law to combat drugs administered by the Syrian regime,” as it will be deprived of large foreign exchange resources.

The researcher at the Jusoor Center for Studies, Khaled Turkay, explained in a statement to the Anadolu Agency that the new decision of the Central Bank is the regime’s need for foreign exchange to provide fuel and food expenses, in addition to military expenses.

Al-Terkawi indicated that the system had held several meetings with merchants, and informed them that it would take this decision, and that its aim was for money transfers to be made through exchange companies licensed and approved by it.

And he continued, “Although the regime seeks, through this decision, to solicit remittances from expatriates abroad and from humanitarian organizations, if the dollar flows with no increase in production, this will push it to print more money, which will lead to a depreciation of the lira again.”

For his part, Yahya Al-Sayed Omar, head of the Trends Center for Economic Studies, explained to Anadolu Agency that the Central Bank’s decision is considered a partial float, as it only included foreign transfers, and kept the price of the dollar in the bulletin of banks operating in the regime’s areas at 4,522 pounds, and the price of the military allowance dollar at 4,522 pounds. 4500 lira.

Omar pointed out that the current decision aims to attract incoming foreign remittances to regime-controlled areas, and this indicates that most of the resources on which the regime’s government depends have dried up.

He explained, “The (regime) had no choice but to work to attract foreign remittances, especially since the previous security solutions did not succeed in attracting remittances to official channels.”

He added, “There is no accurate number of the value of foreign remittances received into the regime’s areas, and it cannot be accurately estimated, since most of them come through unofficial channels, and they are estimated daily between 5-10 million dollars.”

And Omar added, stating: “These remittances constitute an important resource for financing the government of the regime, and this decision would attract the majority of these remittances.”

Regarding the impact of the decision on microeconomic indicators, he stated that it will be limited, since pricing in regime-controlled areas is mainly based on the parallel market price, “therefore pricing will not change in light of the current decision.”

“It is necessary to point out here that the effectiveness of the decision depends on updating the transfer rate on a daily basis, as the exchange rate of the dollar in the parallel market is constantly changing, and the official rate must be changed in line with the change in the parallel,” according to the spokesman.

And in the event that the exchange rate of remittances does not change, it will lose its effectiveness, “for example, if the exchange rate in the parallel market reaches 8,000 pounds, and the official price remains at 6,650 pounds, the decision will have completely lost its effectiveness.”

More than 10 years ago, the abundance of foreign exchange in the Syrian markets declined, at a time when dealers and citizens preferred the dollar over the local currency, to protect their savings from the decline in exchange rates with the significant deterioration of the value of the Syrian pound.

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