Dr. Ahmad Yousef
It is true that, the Syrian pound (lira) began to lose its value at an accelerated pace with the beginning of the Syrian crisis, but what it has witnessed during the last November wasn't normal in the history of the Syrian economy, as it was a great shock to the categories of the Syrian society, because they were accustomed to the gradual increase in the value of foreign currencies against the Syrian pound for nearly five decades like many underdeveloped countries, for various reasons, which constitute the common characteristics of most of the countries of this group.
Naturally, this great collapse in the value of the Syrian pound is a source of many contradictory economic and political analyses, due to the horrific consequences it has on the Syrian society, which is living its most difficult days after eight years of the catastrophic crisis in the country, which has been divided long and wide by the influence of the combination of internal and external powers, but it isn't normal for us to consider the crisis that the Syrian pound faces as a result of its moment, but it is caused by some unusual measures in dealing with the Syrian pound. This matter carries many more complications, as the issue of the decline of the value of the lira and reaching the point of collapse against foreign currencies in a record moment, can only be explained through the intertwining of a group of economic and political factors that affect its value.
This necessitates asking a group of questions and searching for logical answers to them. Perhaps the most important of these questions are the reasons for the decline of the lira, and whether it is a temporary case in the Syrian crisis or it will continue for another period?
Analyzing the Syrian economic history in the last fifty years confirms that, the Syrian pound was one of the most important victims of the expansionary economic policies in the 1970s, which focused on the great expansion of the productive institutions without focusing on expanding in production, benefiting from huge cash flowing from Arab countries supporting them in the October War. These flows continued until 1980, and were stopped at the time due to the Syrian government’s choice to line up with Iran in the first Gulf War.
The results of the Gulf cash flow and its interruption have led to the transformation of the productive institutions belonging to the public sector to a great burden on the state rather than being a source of income, and thus a source of preserving the value of the lira. As a result, the Syrian society experienced lean days during the 1980s, and the situation wasn't better in the next two decades, in which the state was forced to make economic amendments, most of which focused on openness to the private sector and foreign investment.
Those amendments opened the door wide for the emergence of alien groups on the Syrian economy, attempting to achieve indirect privatization of the Syrian economy via taking advantage of the new legal system, as the proportion of the private sector’s contribution to the formation of the Gross Domestic Product (GDP) reached about 60% of the contribution of all sectors, and the Syrian citizen began losing with part of the purchasing value of his income despite lira's maintaining of an exchange rate which was almost about to be constant for a while not long.
The problem doesn't lie in the high contribution of the private sector in the formation of GDP, but rather in the concentration and position of the private capital in a narrow circle, along with the transformation of most productive companies belonging to the public sector into existing and unproductive structures of the value added in the economy, and this has led to the creation of a major structural imbalance in the economy, in which the citizen lost his income in light of the liberal transformation in the economy.
Economically, what can happen to the Syrian pound since the beginning of the Syrian crisis can only be explained as cash inflation, in which a large amount of money is chasing a small amount of goods and services. If the increase in the amount of money isn't caused by deficit financing, which the central bank usually uses to finance some investment or current expenditures, then it is definitely caused by the sharp decrease in the products of the different sectors.
So, the collapse described in the Syrian currency isn't due to a development process that is tainted by errors and problems which may seem normal, and which accompany any development process in the underdeveloped countries in general. On the contrary, it is caused by a set of factors that cannot contribute to any development step or it leads to positive economic growth rates, to say the least. The developments of the Syrian situation since 2011, cast strong shadows on the economic field, and play their role in the decline of the economic performance until the Syrian economy reached a stage where it became exhausted and lost power in facing the simplest challenges which may face.
In general, the factors that cause the Syrian currency to lose its value progressively over time are divided into two groups, which are closely related and affect each other. One is the combination of the internal factors resulting in part, from the accumulation of a heavy legacy of errors in the course of the Syrian economic development, and in another part, from the destruction machine that imposed itself in the Syrian field with the beginning of the Syrian war.
These factors can be illustrated as follows:
1- Imbalance of the productive structures: The battles taking place on the Syrian geography led to the destruction of more than 80% of the country’s productive capacity, as the productive sectors have affected by sabotage operations, or the emigration of the Syrian capitals abroad. This situation led to the decline of the total domestic production dramatically from about $60 billion in 2010 to $22 billion in 2015 and to 12 billion dollars in 2015. This, in turn, led to a serious decline in the value of exports to %12 in 2018, after it was covering about 60% of total imports, according to 2010 statistics, while the unemployment rate rose to 50% of the workforce.
2- Evolution in the poverty line: Perhaps the armed conflict on the Syrian territories formed one of the crises which left its bad mark on the human level, as it led to the displacement of nearly half of its population from their homes, and nearly a quarter of the population resorted to various parts in the world escaping the hell of fighting in every part of its territories, while the rest of them, their poverty line has developed to more than 80% after it was within 30% before the outbreak of the crisis. It is assumed that, this leads to a decrease in demand for goods and services, and thus to a decrease in prices, but what is noticeable is the rise in prices with the continuation of the weakness of the purchasing power, and the entry of the Syrian economy into the state of inflationary recession, as this confirms the weakness of the domestic production and increasing of the economic exposure towards abroad, which in turn, leads to a doubling of the need for hard currencies in the absence of local economic factors to secure them.
3- Weakness in fiscal and monetary policies: Fiscal policy wasn't characterized by stability since the 1960s, it remained fluctuating continuously, without playing its role in achieving the economic balance and developing the public revenues according to the foundations which lead to its actual contribution to the development of investments in the country. Monetary policy also follows the fiscal one, and has no independence that gives it a role in achieving integration with the fiscal policy in order to contribute together to the development of the economic policy in the end.
4- External sanctions and uncertainty in the future: Western sanctions on Syria came at an early stage of the crisis, and Western countries announced that, the purpose of imposing sanctions was to contribute to the overthrow of the Syrian government within a short period. Initially, they targeted the two most important sectors of the Syrian economy, both oil and banking sectors, in an effort by the authorities that imposed the sanctions to deprive the Syrian economy from securing hard currencies. These sanctions have achieved their economic goal, as it led to the decline of the Syrian monetary reserve to less than one billion U.S. dollars during five years of the crisis, after it was nearly $20 billion at the beginning the crisis. However, it worsened the Syrian situation only politically, and those international bodies have certainly become part of the Syrian crisis, a pivotal factor in the absence of the political stability and increased expectations of the political uncertainty for the future of the country.
5- The impact of the Iranian and Lebanese crises: The Iranian currency lost its value at high rates due to the high costs of the resulting war in the Syrian and Yemeni crises, in addition to the burdens borne by the Iranian economy in both Lebanon and Iraq, and the burden resulting from the international sanctions that burdened it, which led to repeated popular protests, and forced the Iranian government to search for economic mechanisms to meet the challenges facing it internally and externally, and it will have to take strict measures to address its complex circumstances. Also, the Lebanese banks' dealings with deposits via foreign currencies and their retention of those deposits closed the way to the flow of hard currencies into the Syrian markets, where the Syrians considered the Lebanese banks as a haven for their deposits in foreign currencies, whether as a result of prohibiting them from dealing in the Syrian market, or because of circumvention of Western sanctions on the Syrian banking system. Some unconfirmed estimates indicate that, the volume of the Syrian deposits by U.S. dollars in the Lebanese banks is about 30 billion.
In fact, the issue of the depreciation of the Syrian pound, in light of the political and economic complications isn't an immediate issue, but rather it is related to the reality of the state of the economically exhausted country, which, according to the United Nations estimates, needs an amount of $250 billion to re-achieve the launch. No doubt that, this seems impossible in the foreseeable future, because the Syrian crisis is still continuing and it is hostage to the international and regional powers on one hand, and on the other hand, most of the guarantor production tools to secure hard currencies for the use in the construction process have been destroyed or stolen.
Proceeding from that, we are sure that, the lira will continue to lose its value gradually, despite some temporary rest or return stations, and it won't deviate from the rule that it has followed since the beginning of the crisis, and we won't see a cheap dollar in the Syrian markets as long as the war continues, and if it stops, we will be on the covenant either with the reconstruction or with chaos. In both cases, the Syrian markets won't be congratulated by the decrease in prices, because prices in cases similar to the Syrian case are like the genie coming out of the bottle, and it won't return to it again.