The Syrian government is cracking down on black-market currency exchange businesses and individuals who transfer local or foreign money out of the country in what central bank Governor Adib Mayaleh said was the latest move to stabilize the value of the plummeting pound.
The legal amendment, passed on July 4, subjects anyone who “practices the currency exchange profession without a license” to between three to 10 years in prison and a fine equivalent to at least 5 million Syrian pounds or four times the recorded monetary value of all cash and electronic money transfers and bonds sold.
According to a Damascus-based economist and currency exchange firm operating in Damascus, the amendment has effectively criminalized all currency dealings by professionals and individuals outside government channels.
Zaki Mehchy, the founder of the Syrian Center for Policy Research in Damascus, said the government had arrested many exchangers since the new penalties were put in place, but had made little dent in the pound’s free fall. The Syrian currency hit a record official low of 130 pounds to the dollar in April – the steepest decline of any currency so far this year – and is currently fetching upward of 220 to the dollar on the black market.
“Now [the government is] concentrating on the volume of bank notes in the market. They want to minimize the impact on the Syrian pound by reducing the liquidity in the market, but this is not sustainable in the long term,” Mehchy said. If you arrest a few people who are working in money exchange businesses this will not solve the problem.”
There are currently three different currency markets operating in Syria, Mehchy said. In the official market, the exchange rate is currently about 110 Syrian pounds to the dollar, though the government has extended credit lines to industrialists and allowed limited currency transfers at a rate of about 200 pounds to the dollar in what Mehchy calls the “parallel market.” On the black market, the pound was valued at around 235 to the dollar Monday, Mehchy said, though the value fluctuates across the country.
“People in Syria prefer to go to the black market if they want to liquidate dollars for Syrian pounds because they get more money,” he explained. “It is very difficult to get U.S. dollars for Syrian pounds through official channels because there are too many limitations. Each person has a single chance per year to exchange pounds for dollars [and] they have to specify the reasons, such as traveling to study or medical needs.”
Meanwhile, Mehchy said, some of the licensed currency exchange businesses that were still operational had access to dollars at the official or parallel exchange rates and sold them at the black market rate to turn a profit.
One currency trader in Damascus who spoke on condition of anonymity said most licensed currency exchange businesses already fled Syria over the past two years, so the new penalties had ended up taking the biggest toll on regular Syrians attempting to salvage what was left of their savings. “Now all individuals who want to change their money from pounds to dollars are being treated like black-market money dealers,” he told The Daily Star by phone. “All the legal currency exchanges left the country months ago.”
He said the black-market value of the currency differed between regions and fluctuated hourly so it was nearly impossible to determine the real value of the pound on any given day.
“You can’t establish an exact black-market rate,” he said. “You are talking between 250, 248, 220 to the dollar depending on the area.”
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