Economic disaster looms as coronavirus lockdowns reduce remittances to Syria

AMMAN — As much of the world remains confined to their houses, Syrians in the diaspora are struggling to generate income and find ways to send money back home.

“I’ve been trying to send my family $300 for weeks now, but can’t figure out how,” a Syrian from Damascus who is living in Jordan and asked for their name not to be mentioned told Syria Direct. Usually, the Damascene would ask a friend traveling to Syria to transport the money for them, but after the closure of the Syria-Jordan border crossing, that is no longer an option.

Instead, they now have to decide whether to use an official transfer service and lose almost half of the wired money’s value due to official exchange rates or wait for the border to reopen. Currently, the Syrian Central Bank has set the official exchange rate to 700 Syrian Pounds (SYP) per dollar—almost 600 pounds less than the black market exchange rate of SYP 1280. 

In addition to the logistical challenges, Syrians working in Jordan, Lebanon and Turkey—the countries with the highest concentration of Syrian refugees in the world—are facing financial constraints as precautionary measures against the coronavirus drag on.

Most Syrians in those countries are day-laborers, working in informal or low-skilled occupations, many of which are considered “non-essential” during the ongoing lockdowns. 

Remittances a vital lifeline for the Syrian economy

According to the World Bank, $1.6 billion worth of remittances flow into Syria every year, comprising almost 15 percent of nominal GDP, according to the latest estimates adjusted to today’s black market exchange rate.

This remittance volume is well above the global average and places Syria in the 13th slot internationally for remittances as a proportion of GDP, right below Lesotho, Jamaica and Moldova.

Still, the true value of remittances could very well be orders of magnitudes larger, as available data does not account for money sent to Syria through informal channels, Dr. Karam Shaar, a senior economist in New Zealand’s public sector and independent analyst focusing on Syrian economics, told Syria Direct.

Currently, the largest sources of remittances to Syria are Saudi Arabia (29%), Lebanon (17%), Jordan (15%) and Turkey (14%). In reality, the share of remittances from the latter three are likely to be higher, as shared borders allow for money to be carried into the country. 

All four countries, however, have instituted severe lockdowns that halt or seriously reduce the work of the industries in which Syrians are predominantly employed, such as construction. 

In addition, the expected global economic slowdown is likely to exacerbate existing structural issues within countries like Lebanon and Saudi Arabia, further jeopardizing the livelihoods of Syrians working there. 

“Lebanon was on the verge of collapse before COVID-19 lockdowns, and was already defaulting on some of its debts,” Dr. Shaar explained. “Jordan’s economy is quite small and wasn’t doing well either. So the amount of money being sent by Syrian nationals will be most affected in Lebanon and Jordan,” he added. 

The ongoing oil war between Saudi Arabia and Russia also threatens the mid-to-long term economic future of the Kingdom and its ability to employ its own citizens, let alone the millions of migrant workers who reside there on tenuous work visas. 

“The outlook for Saudi Arabia is pretty grim,” Dr. Shaar said, pointing to the sharp drop in oil prices as a negative factor for the country’s economic prospects. “The impact in the near term might not be as strong, but in a couple of quarters it will be quite apparent,” he said. 

Official channels devalue remittances

Typically, the depreciation of the Syrian Pound would be a boon for Syrians looking to send money back home, assuming the currency of the host country maintained or increased its value as Syria’s fell. 

For the past month, currencies around the world have been depreciating relative to the US dollar as coronavirus-driven market volatility causes investors to seek a safe haven in the traditionally stable Greenback. 

As the dollar’s value appreciates, currencies which peg their value to the dollar—such as the Jordanian dinar and Saudi riyal—rise as well. At the same time, the Syrian pound has depreciated at a higher rate than most other currencies, including the Turkish Lira and Lebanese pound. 

Thus theoretically, the remittances sent by Syrians abroad should go even farther when converted to Syrian Pound. 

However, a ruling by the Syrian Central Bank on February 6 specified that all remittances coming into Syria must use the official exchange rate of SYP 700 per dollar, a conversion which almost halves the value of any incoming money transfer as the de facto exchange rate sits at 1280 pounds per dollar at the time of publishing. 

To avoid the official exchange rate, many Syrians rely on known black market money exchange agents—known in Arabic as a hawala—who send the money to their counterparts in Syria in undocumented transfers. However, physical limitations of movement in both sending and receiving countries are preventing Syrians from accessing hawala agents. 

“Because of the lockdown in Jordan, I can’t reach the money exchange office. There’s no hawala in my neighborhood and I am not allowed to drive [due to the lockdown],” the Damascene said. 

They further explained that the people to whom they are sending money face the same problem, as there is no money exchange agent in their neighborhood in Syria and lockdown procedures prevent them from traveling to agents in other cities. 

As for those Syrians living in neighboring countries, smaller amounts of money could normally be sent via a friend or family member visiting home. 

However, Syria has closed its borders with both Jordan and Lebanon, while Turkey has also closed its crossing points in the north. Smuggling money into the country has also become more difficult as scrutiny increases on both sides of the border to prevent the spread of the virus. 

The drop in remittances cannot have come at a worse time, as extreme poverty is already widespread in Syria, with 83 percent of Syrians living below the poverty line, according to a 2019 UNICEF report. 

Lockdown measures will only further worsen the living conditions, according to a Damascus University economics professor, who estimated that Syria will lose SYP 1 trillion ($781.2 million) every month under the current lockdown measures. 

If the global economy moves deeper into recession, it is likely that remittances to Syria will continue to decline, as millions of out-of-work Syrians are unable to send money home.