x Abu Dhabi, UAEThursday 27 July 2017

Black market thrives as Syria's economy is suffocated by fear

As unrest and instability have led to inflation and the collapse of the pound, many Syrians have withdrawn their savings from the banks and are swapping them for US dollars, at almost any rate.

Our recent journey from Beirut to Damascus was enlivened by the Syrian driver, who seemed jubilant about the benefits he was harvesting from the political and economic miseries of his country. In a stream of phone calls he closed deals on cars, arranged to smuggle small pieces of medical apparatus, sold US dollars, and secured the complicity of border officers.

His humorous language and code words were entertaining, despite the serious subject matter, and between calls he told stories about his ability to manipulate Syria's situation to make a profit from anything he could get his hands on. "This is the 'freedom' they ask for," he told me cheerfully at the start of the trip, "and we are taking advantage of it."

Cars are inspected at the Syria-Lebanon border, but not very effectively. Small bribes open the way to smuggle items across. Official border points may be hard to use "informally", but there are also uncontrolled crossing points.

We saw a convoy of more than 100 lorries heading to Lebanon using a special lane. How can they be inspected, when their size makes it so simple to smuggle anything at all in them? And how do they cross the border given the current sanctions?

According to rumour, these convoys traverse the country without paying transit fees, or only a few of the vehicles do. They can also find a way to fill their tanks, in a country direly short of fuel, at a subsidy price much lower than that in neighbouring countries.

One version of the rumour asserts that about 30 per cent of these lorries are unloaded inside Syria, providing a variety of items to the Syrian government. Meanwhile the price of registration plates for vehicles that can cross Syria's borders is skyrocketing because there is so much profit in smuggling.

Syria's economic problems have unleashed an appetite for smuggling, and a black market in foreign currency. Official economic policies have become futile in the face of declining foreign-currency reserves and the dwindling value of the Syrian pound.

The pound had maintained a relatively steady value for a few years before the unrest began. But the exchange rate, 48 pounds per US dollar in March 2011, has plunged - all the way to 106 to the dollar for a few hours in March of this year (the official rate now hovers around 62).

The Syrian finance ministry attributed the fall in March to "speculative traders' manipulation in the black market", the state news agency SANA said.

As instability leads to inflation with the pound collapsing, many Syrians have withdrawn their savings from the banks and are swapping them for US dollars, at almost any rate. Anxious dollar hoarders check the rate every hour.

Exchange dealers are aware of the public panic when it comes to "the green", as Syrians call the US dollar. Exchange offices are, officially, not functioning, but they are furtively open for a few customers, who have to go through lengthy and complicated procedures.

"I needed only $300 to $400 US, yet I felt as if I was asking for millions," a friend said. "I was sent by a trusted friend to one dealer, who refused to talk to me on the phone and denied that he deals in currencies. Then he requested two references and made several phone calls before he gave me the money."

During that last trip, the Syrian driver offered a better exchange rate than the black market. It is like a stock market, he claimed: one has to play it very quickly.

Also like the stock market, there's a risk of fraud. People have grown increasingly sceptical amid rumours of forged dollars.

Some big investors are said to have sent their wealth out of the country, using small businessmen, who haven't been tightly restricted, to smuggle cash out or to buy foreign real estate.

The Central Bank of Syria tried to intervene to prop up the pound: it released reserves of US dollars, announced an official fixed exchange rate, and regulated many imports. But in light of the lack of accurate economic statistics, there has been controversy over how long the Central Bank's cushioning actions will be effective.

Syria's GDP shrank by 2 per cent in 2011, after growing by 3.2 per cent in 2010, the International Monetary Fund says. This decline will continue this year; obviously assets cannot be used productively in this atmosphere.

And yet the government remains determined to hold on regardless of the human or financial costs. The business community may turn on the regime, as we have seen in recent merchant demonstrations in Damascus and Aleppo, because of the declining economy and the devastating official policies that protect only the inner circle of the regime.

Conversely, though, many Syrians who have supported the uprising so far, some in public and some discreetly, have started to think about the tightening sanctions and their own economic vulnerability.

They may find themselves obliged to step back from the opposition, which still lacks an economic plan or a development programme to build confidence in a new era for Syria.

 

The author writes from Damascus under the pseudonym of Jasmine Roman

On Twitter: @JasmineRoman01