| New York Times | - |
Even as President Bashar al-Assad of Syria
is proclaiming battlefield momentum against the insurgency with the
help of his Hezbollah ally, he appears to be facing a new threat: a
rapidly weakening currency that has unnerved many Syrians.
While Claiming Battle Gains Against Rebels, Syria’s Assad Is Facing Currency Crisis
By RICK GLADSTONE
Published: June 19, 2013
Even as President Bashar al-Assad of Syria is proclaiming battlefield
momentum against the insurgency with the help of his Hezbollah ally, he
appears to be facing a new threat: a rapidly weakening currency that has
unnerved many Syrians.
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The currency, the Syrian pound, fell about 30 percent in value against
the dollar over the weekend, partly on news that the United States
intended to arm some elements of the rebellion seeking to topple Mr.
Assad.
Money traders and economists said the plunge might have been accelerated
by the apparent unwillingness — or inability — of Syria’s Central Bank
to halt it by buying pounds with dollars or euros, suggesting the
government’s supply of foreign exchange reserves is running low.
The Central Bank governor, Adib Mayalah, announced Tuesday that to help
stabilize the pound, Syria would tap into a $1 billion credit line
provided by Iran. That appeared to be helping on Wednesday. But the
effects of that aid are considered temporary at best, as Iran is facing
its own severe financial constraints.
For Mr. Assad, a number of basic financial problems appear to be
coalescing after more than two years of conflict: Western sanctions that
have collapsed Syria’s main money-earning industries of oil and
tourism, a near-collapse of regular commerce inside the country and the
cost of fighting the insurgency, which has left more than 93,000 people
dead and millions displaced.
The pound, which traded at about 70 per dollar before the uprising
against Mr. Assad began in March 2011, has been eroding gradually since
then and was trading at 170 per dollar last week. Money traders in Syria
and the United States said it nose-dived starting last Friday and had
weakened to 220 per dollar by Monday, reflecting some chaotic selling by
Syrians worried that the pound could weaken further and wipe out their
savings if they did not convert to dollars or euros.
Syria experts who once estimated the Central Bank had at least $17
billion in foreign exchange reserves before the conflict now believe
that because of Mr. Assad’s international isolation and the cost of the
war that amount has dwindled to as little as $2 billion.
“Syria’s government doesn’t have cash,” said Andrew J. Tabler, a Syria
scholar at the Washington Institute for Near East Policy. “They might be
good at shooting people, but they’re not so good at the economic
stuff.”
Others said the Central Bank’s effort this week to arrest the pound’s
decline had strengthened it to about 190 per dollar by Wednesday, but
they suspected the pound would resume falling.
Some were suggesting it could go to 500 to the dollar, which could cause enormous inflation problems in Syria.
A Syrian expatriate currency market trader, who spoke on condition of
anonymity because he has relatives in the country, said he believed the
credit line from Iran was a short-term psychological tool and might not
even exist. A further strengthening of the pound would be a telling
indicator.
“Unless they’re able to knock it back to 150, I would imagine it would
just be a cosmetic process,” he said. “I’m personally extremely
skeptical.”
In a separate possible signal of Iran’s frugality, officials of the
Palestinian militant organization Hamas, which governs the Gaza Strip,
said Wednesday that Iranian financial assistance had declined sharply in
recent months. They attributed it to Hamas’s decision to break with Mr.
Assad over his efforts to crush the Syria uprising.
“We are suffering from a financial crisis and we are trying to go beyond
the problem,” said Ghazi Hamad, deputy minister of foreign affairs in
the Hamas government.
Officials in Gaza refused to disclose figures, but experts in Gaza
estimated that Iran had been channeling about $20 million a month to
Gaza.
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