Syria: Cash Flow Problems for “Mayor of Damascus” #SyriaCrisis

Syria is overwhelmed with other economic challenges–apart from the serious human rights abuses, EU & US sanctions, and refugee crisis produced in Lebanon, Jordan, Iraq, and Turkey.  Prior to the March 15th Day of Rage events in Syria, the Syrian pound traded at 47 pounds to the US dollar.  Now, Syrians are lucky if they only need to exchange 235 pounds to the U.S. dollar. 

Last month, Syria’s oil minister, Sleiman Abbas, and Iran signed a 3.6 billion dollar oil deal to finance Syria’s infrastructure costs–Syria’s conflict has resulted in infrastructural damage costing . Although half of Syria’s GDP is financed by its agricultural and energy sectors, the oil sector has gained in its importance to finance the regime because the conflict has severely limited agricultural production.  In 2011, oil represented about 33 percent of Syria’s government revenue. 

Note that Bashar Al-Assad’s cousin, Rami Makhlouf, owns about 5.6%  stake in UK petroleum company Gulfsands–not to mention other stakes in key sectors, like telecommunicationsSource: ForbesMaklouf is nicknamed “Mr. Ten Percent” because he typically received a 10 percent commission on each transaction.  Source: Ya Libnan.  

Therefore, the increasing reliance on oil to support the regime has further weakened the regime’s purse strings: Syria’s oil production has dropped from 380,000 barrels per day to 20,000 barrels per day, according to economist Sami Nader’s analysis.  Consequently, four Syrian regime policy decisions resulted from the dramatic economic decline of Syria’s dwindling public sector pockets. 

  1. The Assad regime BANNED foreign currency use in commercial enterprises.  By banning foreign currency in local commercial transactions, MAYBE the regime can temporarily press pause on the black market itching for foreign currency as the Syrian pound continues to decline in value.   
  2. Syria’s Central Bank Governor, Adib Mayaleh, LIFTED dollar sale restrictions.  Specifically, Syria’s state controlled media reported that Syria’s Central Bank sold its reserves of dollars to 10 private banking institutions at the rate of 173.27 Syrian pounds to the dollar to cover a week’s worth of transactions.
  3. The regime raised public sector salaries by 40% as well as raised the penalty fines for trading in the black market, according to the U.S. based Al Monitor.  The salary increase follows the subsidy increases in April 2011 to buy citizens’ loyalty.  
  4. The regime recalled Syrian Armed Forces from 60% of the country, and is keeping them closer to Damascus, to reduce their military financial commitments.  Since 2011, Syria has already spent an estimated 7 billion dollars to finance its military operations. 

But with all these measures, what’s to stop Syrians from resorting to a barter system as they’ve lost confidence in their Syrian currency.  If Syrians lose confidence in their nation’s currency, and their government’s ability to manage the currency crisis, then Syrians have every right to dismiss their national government’s other efforts.  Syria is struggling to finance the imports needed to meet their food demand.  At best, the current leadership operates as if they are the Mayors of Damascus–and nothing more.

Source:

The central bank in war-torn Syria has lifted restrictions on the sale of dollars to individuals, state news agency SANA said Wednesday, in a bid to curb black market trade.

“Citizens may purchase foreign currency at banks, for non-commercial purposes, according to the rates fixed by the central bank,” the bank’s governor Adib Mayaleh said, quoted by SANA.

Allowing banks to sell foreign currency was part of “efforts by the central bank in the domestic market to stabilise the price of the Syrian pound and stop speculation on the exchange rate.

“The central bank will continue to finance imports of basic goods through banks operating in Syria at preferential rates,” said Mayaleh.

The agency said the central bank had sold dollars to 10 private banking institutions at the rate of 173.27 Syrian pounds to the dollar “to cover the needs of the local market between August 13-19”.

Before Syria’s bloody uprising erupted, the exchange rate was about 50 pounds to the greenback.

The rate is now about 200 to the dollar on the black market, and has climbed as high as 300 pounds in the 29 months of fighting in the country.

Before the war began, Syrians could exchange $5,000 a year, but that was reduced to just $500 at the end of 2011, pushing many to turn to the black market to convert their rapidly depreciating funds.

Syria has also banned the use of foreign currency in commercial enterprise, in a bid to halt the slide of the Syrian pound.

Politics

New Saudi-supplied missiles boost rebels in south via

Interests

U.N. team to conduct chemical weapons inspections was finally allowed entrance by Syrian regime.  Unfortunately, the death toll attributed to Sarin gas is disputed.  Syrian National Coalition leader, George Sabra, states that 1,300 Syrians have died as a result of the chemical weapon attack carried out by the Syrian Armed Forces.  Syrian Information Minister Omran Zoabi argued that the allegations were “illogical and fabricated.”

Technology

says the Syrian Electronic Army is getting more dangerous: Syrian Electronic Army infiltrated Outbrain (news delivery service used by WashPO ): http://mashable.com/2013/08/16/syrian-electronic-attack-outbrain/

Analysis

For previous analysis on the human rights and political interplay, PITAPOLICY has been blogging about it since March 15th, 2011.  Here are the most shared pieces asking 1) “When Will Right to Protect Apply?” & arguing 2) “Rape is a War Crime” among other civil society crises.


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