Plummeting Syrian pound hits new black market low

A specialized website put the volatile exchange rate at 975 pounds to the dollar — more than double the official rate of 434 Syrian pounds. (AFP)
Updated 03 December 2019

Plummeting Syrian pound hits new black market low

  • The drop comes amid a spiraling liquidity crunch in neighboring Lebanon
  • A specialized website put the volatile rate at 975 pounds to the dollar — more than double the official rate of 434 Syrian pounds

DAMASCUS: The value of the Syrian pound on the black market sank to 1,000 to the dollar at some money changers Tuesday, marking a new record low for the nosediving currency.
The drop comes amid a spiraling liquidity crunch in neighboring Lebanon, which has long served as a conduit for foreign currency entering the heavily sanctioned government-held areas of Syria.
One currency exchange office in the Syrian capital Damascus said he was selling dollars on the black market for 1,000 pounds for the first time on Tuesday.
A specialized website put the volatile rate at 975 pounds to the dollar — more than double the official rate of 434 Syrian pounds posted by the central bank on its website.
At the start of the war in 2011, the rate stood at around 48 pounds to the dollar.
In the Old City of Damascus, a trader who preferred not to give his name said everything from food to transport had become more expensive in recent weeks.
“Prices have doubled in the past two months,” the trader said.
“Everybody prices their items according to the new dollar exchange rate” on the black market, he explained.
Syria analyst Samuel Ramani said the pound had fallen by 30 percent since anti-government protests erupted in Lebanon on October 17.
An economic downturn has accelerated since the protests started, and a liquidity crunch has become more acute in a country that has long served as an economic and financial lifeline for dollar-starved Syrian businesses.
As Western sanctions tightened on Syria during the war, many in the country have opened businesses in neighboring Lebanon, stashed their money in its banks and used the country as a conduit for imports.
But Lebanese banks started introducing controls on dollar withdrawals over the summer, straining the supply of the greenback to Syrian markets.
“Lebanese banks are significant for Syria’s economy as they give Syria back door access to the US dollar,” he said.
“Based on commentaries from Syrian businesspeople, it appears as if the economic crisis in Syria is even worse than that in Lebanon as a result of the protests,” Ramani said.
In another part of Damascus, a 30-year-old working in a shop selling computers and mobile phones imported from Lebanon said the store had to increase all prices.
“In the end this is going to be reflected in the market and most people won’t be able to pay according to the new prices,” the young salesman said.
“We fear further collapse,” he added.
Syria’s eight-year civil war has battered the country’s economy, and depleted its foreign currency reserves.
An array of international sanctions has targeted President Bashar Assad’s regime and associated businessmen since the start of the war in 2011.
Authorities estimate that since 2011, Syria’s key oil and gas sector has suffered some $74 billion in losses.
The United Nations estimates the conflict has caused some $400 billion in war-related destruction.
It has also killed 370,000 people and displaced millions more.


German finance minister plans ‘debt brake’ suspension

Updated 27 February 2020

German finance minister plans ‘debt brake’ suspension

  • Scholz has long backed plans to lift a near-unbearable burden of repayments from 2,500 municipalities by shifting €40 billion ($43.5 billion) of their debts to Berlin

BERLIN: German Finance Minister Olaf Scholz plans to temporarily suspend a government “debt brake” to hand out tens of billions of euros to struggling municipalities, weekly Die Zeit reported on Wednesday.

With years of fat budget surpluses, Germany has long faced calls at home and abroad to loosen its purse strings, but the spread of the novel coronavirus and its likely impact on economic growth have given them new impetus.

“Scholz will present a plan in March,” Die Zeit wrote without citing its sources.

Scholz would need two-thirds majorities in both parliament’s directly elected lower house and the upper house representing the states to suspend the debt brake.

Anchored in the German constitution at the height of the financial crisis in 2009, the rule prevents government from running a deficit of more than 0.35 percent of the gross domestic product in normal times.

Finance Ministry spokeswoman Katja Novak declined to comment on “speculation,” telling AFP “the finance minister will present his proposals for dealing with old debt early this year.”

“At present various options are being discussed,” Novak added.

Scholz has long backed plans to lift a near-unbearable burden of repayments from 2,500 municipalities by shifting €40 billion ($43.5 billion) of their debts to Berlin.

He hopes it would lift a major hurdle to increasing infrastructure spending and eliminating financial and planning bottlenecks in municipalities responsible for projects like roads and schools.

Many of the towns affected are in deindustrializing “rust belt” zones, like Germany’s most populous state North Rhine-Westphalia.

After years of a no-new-debts policy known as the “black zero,” economists and EU partners are increasingly pressuring Berlin to upgrade aging infrastructure and stimulate its flagging economy with new spending.

A manufacturing slowdown in Europe’s top economy and the looming impact of the coronavirus have added urgency to such calls.

What is more, the European Central Bank’s monetary policy is already extremely loose, with negative interest rates and mass bond purchases under a “quantitative easing” scheme.

With little room to maneuver in Frankfurt, eurozone governments are on the hook to stimulate flagging economic growth, especially in case of a potential hefty shock stemming from an unforeseen event like the virus.