The black market rate of the Syrian pound

January 28, 2014

The black market rate of the Syrian pound

The Syrian government, unlike the Venezuelan one, allows data to be published on the black market rate for the Syrian pound. There are occasional crackdowns, but in general the market is open. In fact, the Syrian central bank regularly engages in currency transactions at what it calls the “intervention rate,” often to stabilize the black market rate. It is much more of a gray market than a black one, akin to Argentina’s “blue market” for the peso.

The below chart shows the gray market value, derived from more-or-less weekly quotations found in the Syria Report.

Before the war, Syria had a fixed exchange rate, with capital controls, but the central bank could more-or-less supply enough the national currency at the pegged rate. There was a brief run on the pound in May 2011, when the government deployed the Army against the protestors. The central bank then tightened exchange controls and flooded the market with dollars. Things rapidly returned to normal.

Problems emerge around the end of 2011. In March 2012 the value of the pound plunged, but heavy dollar sales by the central bank soon stabilized the market rate. In July 2012, there was another brief crisis when the Free Syrian Army attacked the National Security building in Damascus.

The wheels started to come off the bus around the end of 2012, probably because that is when it became clear that inflation was starting to accelerate . The government briefly got a handle on things, but the pounds almost continuously lost value throughout April and May of 2013. In June, however, it looked like the central bank had regained control.

The big crisis hit in June 2013, when the Obama administration announced that it will arm the rebels. Interestingly, the central bank restabilized the currency a month before the first credible accusations of large-scale chemical weapons use by the Syrian regime. The threat of Western attack did not cause any large-scale currency dumping in favor of dollars. That might have been because nobody in Damascus worried about an attack, or because they thought it would do little harm, or because of something else. At worst, the threat of war may have slowed the rise in the Syrian pound back to 150.

(An earlier version of this post transposed sentences dealing with 2012 and 2013. A good timeline can be found at Politico, of all place.)

Since then, the market seems to have more-or-less stabilized. Take what you will what this says about the projected lifespan of the current Syrian government.

Data available on request.

Posted at 11:22 PM in Economics, Levant, War | Permalink