Decisions by the Central Bank of Syria regarding the delivery of some incoming remittances in Syrian currency, and the establishment of the “Damascus Foreign Exchange and Gold Market”, have left a state of anxiety and anticipation among the general public who live on what they receive from foreign remittances.
Researchers considered the decisions, which will come into effect at the beginning of next week, as an attempt to control and regulate the exchange rate market and foreign currency flows, by unifying the price reference without fully liberalizing the lira.
Currency market
At the end of last week, the Governor of the Central Bank of Syria, Abdul Qader Hasriya, announced via his Facebook account that he had decided to create the “Damascus Market for Foreign Currencies and Gold” as a pivotal step in the development of monetary policy and the strengthening of financial stability. He pointed out that this electronic market, which will be established for the first time in Syria according to international standards, aims to regulate trading operations and unify price references, thereby reducing distortions and accurately and instantly reflecting supply and demand forces. It also contributes to enhancing transparency by providing reliable data and continuous updates, which supports the confidence of traders and reduces unregulated speculation. It also aims to eliminate the black market and any other parallel markets, for the first time in more than seventy years.
He explained that the market will be managed through a platform that is updated according to international standards, providing a modern trading environment that adopts best global practices, enhances the efficiency of the foreign exchange and gold market, and serves the goals of monetary stability.
The currency market will provide a platform updated according to international standards, offering a modern trading environment based on global best practices, and enhancing the efficiency of the foreign exchange and gold markets.
In subsequent posts on his page, he emphasized exclusively that “focusing on monetary stability means that monetary policy should remain linked to long-term economic fundamentals, not to momentary fluctuations or the behavior of speculators in the parallel market, with the aim of maintaining a stable currency that supports economic growth and reduces uncertainty, rather than being dragged along by unstable movements that do not reflect the full reality.”
He stressed that the vision of the Central Bank of Syria, in light of the opportunities provided by the lifting of sanctions, is based on building, not patching, which calls for a comprehensive restructuring and modern organization of the financial sector, markets, and related professions.
Exclusively, he stressed that the Central Bank is moving according to a clear vision that places at the heart of all its decisions the interests of all concerned parties and the people first, and the state as it is at the service of the people, followed by businesses and financial institutions, up to the international financial institutions that deal with us, which may be exposed to any risks in the event of a flaw in the mechanisms of dealing.
The governor emphasized that the central bank's strategy is based on a clear foundation: a balanced and transparent exchange market and a fair exchange rate. He explained that administrative pricing inevitably leads to imbalances that benefit a few at the expense of the majority. Therefore, the exchange rate must be determined by a fair and transparent market that reflects the true market value. He stressed that monetary stability is not an option but a responsibility, and any deviation from it directly impacts the lives and livelihoods of citizens. He affirmed the commitment to regulating the market professionally, with integrity and transparency, and to holding accountable anyone who attempts to exploit this sector at the expense of the people.
Concern among citizens
Prior to announcing the decision to establish a foreign exchange market, the Central Bank had issued a decision obligating banks, exchange companies, and domestic money transfer companies contracted with global transfer networks (MoneyGram, Western Union, Shift, etc.) to deliver all remittances received from the aforementioned networks to beneficiaries in Syrian pounds.
The inaccurate leak of the decision, which was presented as affecting all remittances coming to Syria, created a state of anxiety and fear because it means that the citizen loses about 16% of the value of his foreign remittance as a result of the exchange rate differences between the average official bulletin of 113 new liras to the dollar, and the parallel market exchange rate of 132 liras.
Citizens may lose approximately 16% of the value of their foreign remittances due to exchange rate differences between the official rate of 113 old lira to the dollar and the parallel market rate of 132 lira.
The Central Bank tried to address the manipulation of the exchange market atmosphere, and issued a clarification confirming that the decision does not mean delivering all remittances in Syrian pounds, but only remittances received through express transfer companies such as Western Union and the like. It indicated that, in response to the requests of transfer companies, it was decided to postpone the implementation of the aforementioned procedure until May 1st to allow the necessary time to complete the required technical readiness, and stressed that all other remittances will continue to be delivered in the currency in which they were received or its equivalent in Syrian pounds according to the applicable regulations and according to the beneficiary’s wishes.
Increase in foreign remittances
In a statement to Al-Quds Al-Arabi, the director of one of the licensed money exchange and transfer companies said that all licensed money transfer and exchange companies and offices that used to receive foreign transfers are still able to deliver transfers in dollars or at the parallel market exchange rate of the lira, with the exception of companies that used to receive transfers through international companies such as Western Union, which is present at Al-Fouad Company, and MoneyGram, whose services are used by Baraka Bank, National Islamic Bank, and Bemo Bank.
According to the Central Bank’s data, the total number of licensed and duly registered exchange companies and offices in Syria is 40, including 14 companies that are already licensed, and 26 companies that have obtained a preliminary license.
The source, who preferred not to be named, explained that before the fall of the regime, the service of delivering remittances in dollars was not available to anyone, and delivery was done in Syrian pounds and according to the exchange rate of the “remittance dollar,” which was usually several thousand pounds lower than the black market exchange rate. This led to the emergence of illegal money transfer networks through which people who dealt with offices outside Syria were active. These people delivered remittances in a smuggling manner and by contacting the owner of the remittance from international numbers via the “WhatsApp” program to determine the location of delivering the remittance in one of the streets without any guarantees.The source continued: “After the fall of the Assad regime, licensed companies were given the freedom to conduct money transfers, according to the recipient’s wishes, whether in dollars or in their equivalent in lira at the parallel market exchange rate. This phenomenon of transfers outside legal frameworks ended, especially with the licensing of new companies that opened a large number of branches, to the point that some people joke that they have become more numerous than vegetable shops and grocery stores.”
The source revealed that the amount of money transferred to Syria during the last year has certainly improved compared to its size before the fall of the regime. Estimates at that time spoke of between 7-8 million dollars daily, and today it is estimated at about 11 million dollars, due to leaving the freedom to transfer and receive in hard currency or its value in the parallel market, in addition to the flow of money from Syrians residing abroad to their relatives returning to the liberated areas with the aim of repairing, refurbishing and equipping their homes in preparation for their return, with the disappearance of the state of fear of bombing and destruction by the fallen regime’s army.
The amount of money transferred to Syria during the last year has improved compared to its level before the fall of the regime.
The source expected that the Syrian pound's exchange rate would be affected by the decision to establish the Damascus Securities Exchange, without being affected by the decision to restrict the delivery of remittances by some companies to the Syrian pound. He explained that there would not be a significant difference in the value of the delivered remittance due to the existence of a specific exchange margin set by the Central Bank at 15%, which allows the dollar price to rise from 113 new pounds according to the Central Bank, to about 127.5 pounds, compared to 132 pounds in the parallel market today.
He ruled out that the decision to deliver remittances in Syrian pounds would affect the volume of remittances received through the international companies targeted by the decision, in favor of licensed Syrian companies. He said that the matter would have little impact, because the networks of offices of those international companies are spread in most cities of the world, and those who used to transfer through them will continue to do so, except in a few cases, due to the lack of a similar network spread at the international level for licensed Syrian companies.
No liberalization of the exchange rate
Academic and economic researcher, Ziad Ayoub Arabsh, ruled out the possibility that the decision to establish a foreign exchange market would lead to the liberalization and floating of the lira's exchange rate.
He told Al-Quds Al-Arabi that the decision does not necessarily mean that, at least in the near term, explaining that the decision aims to regulate trading and unify the price reference through a balanced and transparent electronic market, but it does not mean a complete liberalization of the exchange rate, as the Central Bank retains a role in supervision and possible intervention, and therefore the official exchange rate will remain a reference for government transactions such as trade and customs, while relying on the forces of supply and demand in the new market.
Arabsh: Delivering remittances in Syrian pounds is interpreted as a transitional measure to direct flows to the new market and ensure the stability of the pound despite gradual liberalization.
He explained that the decision to establish a currency market does not explicitly indicate the availability of sufficient financial resources for daily intervention aimed at maintaining the stability of the value of the lira, especially with the historically low reserves in Syria. He considered that the market may help to reduce pressure on the reserves by regulating trading, but it may require initial interventions that consume hard currency. He pointed out that, on the other hand, speculation and the money supply will be monitored to reduce speculation in the black market and neighboring markets through transparency and regulation. Strengthening the central bank's control over the money supply will be linked to replacing the new currency to control liquidity, which would lead to an immediate and complete end to speculation.
He explained that the decision to deliver remittances in Syrian pounds is read as a transitional measure to direct flows to the new market and ensure the stability of the pound despite the gradual liberalization, hoping that the decision will be a temporary measure until the market is launched, because it may push some traders to unlicensed offices if the official price is less attractive.
He stressed that establishing a foreign exchange market would enhance monetary stability and transparency, reduce volatility, and improve confidence in the lira, but it might temporarily raise import prices. While unifying prices protects citizens from fraud, the rise in the dollar exchange rate will increase the cost of living if it is not followed by increases in everyone’s salaries.
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