DAMASCUS, Syria (North Press) – Recently, the Syrian pound experienced a significant and abrupt decrease in value compared to the US dollar. The exchange rate of one US dollar has dropped to 12,000 Syrian pounds (SYP) from 9,000 SYP within a two-week period. As a result, individuals receiving fixed salaries are experiencing a loss in their purchasing power, with their salaries barely covering their expenses for a single day.
According to platforms that monitor exchange rates, the Syrian pound lost more than 12 percent of its value. As a result, the employee who gets paid 120,000 SYP, which is the average of monthly wages, lost over 19,000 SYP in just two weeks. The actual value of their income dropped from $13,3 to $10.
Panic
Syrians are aware that any decline in the exchange rate will have a direct impact on all goods, without exception, such as fruits, vegetables, real estate, and cars, whose owners often value them in US dollars, even if not officially dealing with that currency, as a means to preserve the value of their property.
The decrease in the exchange rate has caused widespread panic among the people and froze the market. Many traders plan to stop selling in the event that the value of the US dollar increases further, opting instead to preserve the worth of their money by purchasing US dollars. This will subsequently result in an increase in demand for the currency, subsequently raising its value against the Syrian pound, a trader told North Press.
The owner of a shoe shop in al-Khaja market in Damascus told North Press that prices of goods increased by at least 25 percent in just few days, which means the price of any pair of shoes increased by 10,000-25,000 Syrian pounds.
The surging prices have nearly halted the markets. The trader explained that they are unable to simultaneously increase shoe prices along with the rise in the exchange rate, unlike food prices, which grow accordingly. Therefore, merchants prefer to refrain from selling goods that they cannot instantly raise prices for.
The new exchange rate has gradually increased since before Eid al-Adha, reaching 9,000 SYP per dollar in the beginning of July. The exchange rate exceeded the 10,000 SYP threshold on July 11 and continued to soar, reaching 12,500 SYP at the time of making this report.
The Syrian pound’s value has declined by over 200 times against the US dollar in comparison to the period prior to the war, which erupted in March 2011, where each greenback was worth 59 SYP. Despite this, the relevant authorities continue to implement the same monetary and economic policies.
Repercussions
A member of the Commerce Chamber in Damascus told North Press that the instability in the exchange rate has several detrimental effects, starting from the inability to recover the cost of expenses to refraining from selling and buying.
The source further added that companies have ceased advertising, marketing, and developmental activities, including exhibitions and conferences, due to high costs, low profit margins, and the inability to recover capital.
The stability of exchange rates create a balance between supply and demand, exports and all stages of production.
The source also emphasized that no business can be successful or sustainable if it cannot preserve capital and achieve extra profits. Thus, the instability of exchange rates results in the inability to recover capital, subsequently leading to the cessation of investments.
The disruption of production also produces economic malfunctions and cause buyers to stop buying, expecting a greater drop in value.
Therefore, the source said, the stability of exchange rates is one of the most critical factors for production and trade, as it prevents significant losses for business owners and ensures continuity in their operations.
Insufficient
An economic expert told North Press that the declining exchange rates increased expenses of the Syrian government dealing with the Syrian pound. This led to inability to complete government projects due to insufficient budgets.
The surge in exchange rates increases the need to print higher denominations of banknotes to address the issue of circulation of large amounts of banknotes which, in turn, causes more inflation.
The economist said that the significant decline in purchasing power caused by the rising exchange rates renders any increase in salaries useless due to the significant surge in the prices of goods in the markets, whether they are locally produced or imported.