Syria Pulse

Syria issues coins to replace banknotes worth about a dime

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Article Summary
Given the inflation rate and the collapse of the Syrian currency, the Central Bank of Syria issues a new 50-pound coin (worth about 10 US cents) to save on high printing (and reprinting) costs for banknotes.

ALEPPO, Syria — The Central Bank of Syria issued a 50-pound coin Dec. 26 that will be circulated in parallel with the 50-pound banknotes already on the market. Bank officials said the move seeks to meet the Syrian market’s need for currency, particularly in low denominations. The officials said one side displays the Syrian Arab Republic’s coat of arms and issuance date and the other shows the Tomb of the Unknown Soldier and the coin's value, which is the equivalent of about 10 US cents.

In June, the bank had expressed its intention to issue a new 50-pound coin, saying it would enter circulation in late 2018. The bank said one reason it was issuing coins was that so many 50-pound banknotes circulating in the market have become worn out.

In 2003, the bank issued new metal coins in dominations of 5, 10 and 25 Syrian pounds to replace banknotes, as well as the 2-pound coin. This was the last time new metal coins were issued.

Mohammad al-Bakour, a member of the Aleppo branch of the Syndicate of Economists, told Al-Monitor, “There are many reasons behind the CBS [Central Bank of Syria] issuing a new metal coin, including the damage caused to banknotes of the same denomination. In addition, the CBS is unable to issue high-quality printed banknotes due to the elevated cost. Based on that, the decision to issue coins was made.”

He added, however, “Once the coins were on the market, it turned out that they were cast in a primitive way and that the metal used is cheap," perhaps shortening their useful life. 

Bakour said, “The overuse of 50-pound banknotes in buying-and-selling activity in the past few years has contributed to their quick deterioration, particularly after the Syrian 5-, 10- and 25-pound denominations lost their worth.”

He said, “Inflation during the yearslong Syrian revolution has resulted in local markets being almost clear of any commodities and goods sold for less than 50 Syrian pounds. This has caused the Syrian 5-, 10- and 25-pound currency units to lose their purchasing power and the 50-Syrian pound banknotes to become the lowest denomination used on the local market.”

He said, “This has prevented the CBS from printing replacements once their lifespan was over — which ranges between six to nine months — and was behind the CBS governor’s decision as well. His move is designed to allow the people to use it as a coin and cut costs given that, unlike the banknotes, the coin’s lifespan exceeds 25 years.”

Bakour said, “The Syrian pound has been sharply and steadily collapsing since the outbreak of the revolution in March 2011. The CBS tried to limit such a collapse in recent years, but to no avail.” There was a time in 2016 when the exchange rate against the US dollar was 625 Syrian pounds in the black market and 512 as fixed by the CBS. Prior to the Syrian revolution in 2011, the exchange rate against the dollar was 50 Syrian pounds or less.

“The issuance of a new [coin] denomination is linked to the currency collapse. Some denominations (the 5-, 10- and 25-pound coins) have essentially no usefulness in the market, which required the CBS to issue a new coin, namely the Syrian 50-pound one, in big quantities to meet the people's need for it,” he added.

Abdel Kareem Nazir Khaled, a master's student in economics, told Al-Monitor, “There are two types of currency: the standard denominations, which are the large denominations, and the fractional currency, which refers to the small denominations. In Syria, a currency of 100 Syrian pounds and less is considered to be fractional, while the 200 Syrian pounds and up are viewed as standard. The state is able to print small denominations as much as it wants [without international scrutiny]. The issuance [of the 50-pound coin] has no impact on the exchange rate. Rather, it would activate economic activity and boost commercial deals in local markets, which is to the advantage of the regime, whose economy has been experiencing continuous failure.”

He said, “The regime cannot issue the large denominations as they are more subject to international [scrutiny]. These denominations have an impact on purchasing power and point to [higher] inflation. Inflation was visibly noticed in 2017, as the CBS issued the 2,000 Syrian pound [banknote].” That bill is worth about US $3.90.

The central bank's issuance of the new 50-pound metal coin could generate positive consequences in the Syrian street in both regime- and Free Syrian Army-held areas, given the coins' likely heavy circulation because so many 50-pound banknotes have worn out and thus are rarely found on the market.

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Khaled al-Khateb is a Syrian journalist and former lecturer in the Geography Department of the University of Aleppo.

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