Minor improvement, increased demand: What comes next for the Syrian pound?

PARIS — Under new authorities in Damascus, the Central Bank of Syria appears to be trying to close the gap between the official exchange rate of the Syrian pound (SYP) and its price on the parallel market, contrary to the former regime’s approach. 

The exchange rate of Syria’s currency saw a notable improvement after the fall of Bashar al-Assad’s regime was announced on December 8, but has since fallen back to around where it stood before the opposition offensive began on November 27. 

The Central Bank of Syria set the exchange rate on Tuesday at SYP 15,000 to the US dollar, compared to SYP 14,800 to the dollar on the black market. On December 14, the parallel exchange rate stood at around SYP 12,000 to the dollar, its strongest in 2024, after its value fell to an unprecedented SYP 19,000 to the dollar in the final hours before Assad’s fall. 

A slight improvement in the pound’s value “was expected, and this improvement could continue” due to “increased demand for the Syrian pound from those coming to visit or return, carrying foreign currency,” Syrian economist Karam Shaar told Syria Direct. 

Shaar expected Syria’s caretaker government, appointed by Hayat Tahrir al-Sham (HTS) leader Ahmad al-Sharaa (Abu Muhammad al-Jolani), to ultimately ban circulation of Turkish currency, which is currently used in northwestern Syria. 

“The decision would initially cause confusion, but is good in the long term,” curtailing the domestic use of foreign currency and “increasing demand for the pound,” he added. 

The recent improvement in the value of the Syrian pound is not tied to actions by the central bank itself, Shaar noted. “What happened was outside the actions and management of the new central bank,” which this week issued its first banking and exchange bulletins since the regime fell. 

Manaf Quman, an economic researcher at the Istanbul-based Omran Center for Strategic Studies, said the pound saw “a momentary improvement” caused by “the reading of the black market, which is what actually sets the price of the pound based on political, economic and social factors,” alongside “increased demand.” 

“The improvement is relative, and cannot be relied upon at all,” Quman told Syria Direct. As the situation on the ground stabilizes, “the market will return to the actual price, produced by factors such as inflation, cash reserves, trade, supply and demand and economic activity, alongside the totality of political and social factors.” 

Based on the three exchange rate bulletins issued by the central bank this week, the institution appears to be attempting to approach parallel market rates. However, it is unclear whether this policy will continue or succeed. It depends on “the monetary policy it will follow, and whether it will intervene in the market or leave it up to market forces,” Quman said. 

Currently, the central bank’s moves are limited to “canceling and suspending some previous decisions, and it has not come out in a press conference to reveal financial and monetary conditions,” he added. 

Consistency over improvement

Shaar stressed the need for the central bank to “maintain the foreign currency it has, as much as possible, and not use currency that comes in by putting it into the market or improving the pound.” Crucially, “the exchange rate has improved only to a certain extent, and the [formal rate] should not exceed it,” he added. 

What is most needed now is “stability, to a certain extent, and fair pricing,” Shaar said. Stability can be achieved through “managed floating, which is used by many countries, under which the currency fluctuates within certain reasonable limits and the central bank intervenes if it exceeds them,” he added. 

“Some have the wrong idea that the stronger the currency, the stronger the economy,” he added. “This would mean Kuwait’s economy is stronger than Japan’s, since the Kuwaiti dinar is stronger than the Japanese yen, which is not true.” 

Quman expects the exchange rate of the pound to remain within a “highly fluctuating range, since the situation is still unstable,” while “it is impossible to predict the ranges within which the price may move.” The exchange rate and its changes can only be evaluated once “all the economic and financial figures and data are released by the central bank and the Ministry of Finance,” he added. 

“It is difficult to foresee which way exchange rates will go, because we do not know what the new government’s monetary policy will be,” Shaar said. He hopes to see the central bank’s management be “sufficiently aware, and move away from multiple and parallel exchange rates, instead using a single fair and stable exchange rate that curbs the black market.” 

This report was originally published in Arabic and translated into English by Mateo Nelson.