The Syrian lira, also known as the Syrian pound, has been suffering from a severe depreciation in recent years, reaching its lowest value ever on the black market in August 2023. The currency hit a record low of around 13,800 lira against one US dollar, losing more than 43 percent of its value since the beginning of the year. The official exchange rate, set by the Central Bank of Syria, was 10,700 lira per dollar as of Friday 25 August². The currency crisis has sparked protests and discontent among the Syrian people, who are facing soaring prices, shortages of basic goods and services, and widespread poverty and hardship. What are the main reasons behind the lira’s freefall?
- **War and sanctions**: The Syrian lira have been in decline since 2011, when the civil war broke out in the country. The war has devastated the Syrian economy, infrastructure and institutions, causing massive losses of human and material resources, disrupting production and trade, and displacing millions of people internally and externally. The war has also isolated Syria from most of the international community, which has imposed sanctions on the Syrian government and its allies for their role in the conflict and their alleged human rights violations. The sanctions have restricted Syria’s access to foreign markets, investments, loans and aid, as well as to its own assets frozen abroad. The sanctions have also deterred many countries and companies from doing business with Syria, fearing legal consequences and reputational damage.
- **Lebanese crisis**: The Syrian lira has also been affected by the economic and financial crisis in neighboring Lebanon, which has been a major trading partner and financial hub for Syria. Lebanon has been facing a severe currency devaluation, hyperinflation, banking collapse, debt default and political deadlock since late 2019. Many Syrians have kept their savings in Lebanese banks, which have imposed strict capital controls and limits on withdrawals and transfers. Many Syrian businesses have also relied on Lebanese imports, exports and remittances, which have been disrupted by the crisis. The Lebanese crisis has reduced the demand for the Syrian lira and increased the demand for foreign currencies, especially the US dollar.
- **Turkish intervention**: The Syrian lira has also been influenced by the Turkish intervention in northern Syria, where Turkey supports various rebel and Islamist groups that oppose the Syrian government. In 2020, some of these groups introduced the Turkish lira as the new currency in parts of Idlib province, replacing the Syrian lira. The move was aimed at stabilizing prices and protecting the region from the economic collapse in the rest of Syria. However, the Turkish lira itself has been plunging to record lows against the US dollar and other major currencies in recent months, due to Turkey’s own economic and political problems. The depreciation of the Turkish lira has also dragged down the value of the Syrian lira in areas under Turkish influence.
- **Monetary policy**: The Syrian lira’s collapse has also been driven by the monetary policy of the Central Bank of Syria, which has failed to maintain a stable exchange rate and curb inflation. The central bank has been printing money to finance the government’s budget deficit and subsidize essential commodities, such as fuel, bread and electricity. This has increased the money supply and reduced its purchasing power. The central bank has also intervened in the foreign exchange market to support the official exchange rate, which is much lower than the market rate. This has depleted its foreign exchange reserves and widened the gap between the official and parallel rates. The central bank has also faced difficulties in regulating and monitoring the parallel market, where most of the currency transactions take place.
The lira’s freefall has serious consequences for Syria’s economy and society, as it erodes the living standards of millions of people, increases the cost of imports and debt servicing, fuels inflation and unemployment, worsens poverty and inequality, and threatens financial stability and growth. The Syrian government and central bank have announced some measures to stem the currency crisis, such as raising taxes on foreign exchange transactions, easing capital controls, providing incentives for exporters and depositors, seeking foreign funding from friendly countries. However, these steps are seen as insufficient and temporary by many experts, who argue that Syria needs a more comprehensive and credible policy response that addresses the root causes of the problem and restores confidence in its economy.
