The value of the Syrian pound has been in free fall. A financial crisis in neighboring Lebanon, a national lockdown due to Covid-19 and the United States’ new Caesar Act sanctions have all combined to create a perfect storm of misery.
As a consequence, rebel authorities in Idlib and other parts of northwestern Syria are trying to avert economic collapse by replacing the pound with the Turkish lira. While the move may assuage concerns among a population understandably desperate for some sort of stability, it is unlikely to work.
While rebel authorities under direct Turkish influence had previously adopted the lira, other had not. In particular, while Idlib, controlled by the so-called Salvation government in conjunction with the jihadi group Hayat Tahrir al-Sham (HTS), wanted to distance itself from the Damascus regime, it failed to reach agreement with Ankara in the past on how to make the transition.
For much of the conflict, however, the pound was relatively stable, so such a change was not urgent. But in 2019, conditions altered. The pound became more volatile, causing the Salvation government to begin pricing basic goods and services in US dollars and then taking payment in pounds at the prevailing rate.
However, as black-market exchange rates nosedived this year, this was no longer viable. The pound plunged to its lowest point ever in June, sinking to 3,000 pounds for each dollar. The official rate, newly revised around that time, was 1,256 pounds – but good luck finding anyone willing to transact dollars at that price. It was around then that the remaining rebel authorities began to adopt the lira.
For the Salvation government, however, it would have made more sense to adopt the dollar, given that it had been pricing goods and services in the US currency. But because of its affiliation with a designated terrorist organization, it would have been impossible to source sufficient amounts of physical dollars. The only choice, then, was to adopt the Turkish lira as well.
Exactly what kind of deal the Idlib authorities struck with Turkey remains unknown, but large shipments of Turkish currency have begun entering the province as the Salvation government set prices and pay salaries in Turkish money. While the implications of adopting the lira wholesale have yet to become clear, the arrangement raises a number of concerns.
First and foremost, Idlib has no strong, effective, independent civil institution capable of regulating the exchange rate between the lira and the pound, free from manipulation. Instead, that task falls to the Salvation government and, notably, HTS’s affiliate institutions. This places the region’s finances mostly in the hands of HTS, leaving it free to exploit matters to consolidate its control, which is precisely what it is doing.
Recently, HTS gave unlicensed money changers two weeks to become registered or go out of business. The hawala networks – a traditional money-transfer system used in Arab countries and South Asia – also will come under increasing HTS control. As a result, humanitarian aid organizations, which have used the system to transfer funds, are likely to reduce or end their operations in Idlib, where nearly 2 million people are dependent on them for survival.
Next, transitioning to a foreign currency is unlikely to protect Syrians from the depreciation of the Syrian pound. It might help stabilize the value of savings and improve the purchasing power of private-sector employees and casual laborers, who are more likely to be paid in lira, but thousands in Idlib who are still paid by the Damascus regime in the Syrian pound will suffer as its buying power falls even more.
Finally, the lira is no savior. It can hardly be considered a stable currency. It has lost 17% of its value against the dollar since January, because of the Covid-19 pandemic and other reasons. Turkey’s central bank is low on foreign-exchange reserves, meaning further depreciations are possible.
Adopting the Turkish lira will not hurt everyone in Idlib, but it will hurt most of them. More people will go short of food. Famine becomes a real possibility.
The tragedy for the people of Idlib – as if they had not endured enough – is that they have little choice.
This article was provided by Syndication Bureau, which holds copyright.