Conflict in Syria has pushed the pound currency to a record low of 70 to the U.S. dollar on the black market, exchange dealers said on Thursday, eroding a third of its value since an uprising against President Bashar al-Assad began 10 months ago.
Dealers said the weakening of the local currency had accelerated in recent days as Western sanctions bite and Syrians scramble to find dollars. The official rate has also fallen, to 57.9 pounds from 47 pounds per dollar before protests erupted.
“In the last two weeks the supply (of dollars) was about 10 percent of the demand. There was hardly any supply,” said Ahmad Manaa, who runs a licensed currency exchange business in Maisloun Street in Damascus.
The pound’s last major drop over political uncertainty was in 2005 after the assassination of Lebanon's former prime minister Rafik al-Hariri prompted international pressure on Damascus.
Authorities kept the official exchange rate below 50 pounds to the dollar for the first eight months of the latest crisis, but have allowed it to slip more sharply since November, aiming to narrow the differential with the black market.
The Arab League suspended Syria and announced sanctions, cutting off crucial oil revenues, for its failure to comply with a November peace plan which required it to halt the bloodshed, free detainees and open a political dialogue with opposition groups.
Bankers said the move to align the official exchange rate closer to the black market appears to show that authorities recognize foreign reserves can no longer be run down so rapidly to defend the currency.
The fall in the pound’s purchasing power has also ramped up prices on most commodities across Syria, bankers and economists say.
“The trader is now being burdened with extra costs and he is naturally reflecting this cost on the products he is selling,” said Raed Taweel, a garments exporter in the Marji district of Damascus.
Syria’s foreign reserves were estimated at over $17 billion before the unrest began. Up-to-date official figures are not available but bankers believe the reserves have now declined by at least several billion dollars.
Tough controls in a state command economy which force companies to convert hard currency into Syrian pounds at the official rate has also made it difficult for ordinary Syrians and traders to get dollars from banks.
Few currency traders will sell dollars at the official rate, traders said, and Syrians worried by the violence and the shrinking value of their local currency savings are hoarding the greenback.
“The demand for dollars is huge. Many people are transferring some of their savings into dollars ... they are afraid the pressure will grow on the pound in the months ahead,” said another currency dealer in the Damascus commercial hub near Sabaa Bahrat, who requested anonymity.