Will Turkish lira save economy in Syria's opposition-held areas?

As Syria's currency plunges against the dollar, the opposition's Syrian Interim Government plans to replace the Syrian pound with the Turkish lira in the areas it controls.

al-monitor A merchant counts Turkish lira banknotes at the Grand Bazaar, Istanbul, Turkey, March 29, 2019. Photo by REUTERS/Murad Sezer.

Dec 18, 2019

ALEPPO, Syria — The Syrian pound's staggering loss in value has renewed talk of replacing the currency with the Turkish lira in the northern areas under control of the opposition's Free Syrian Army (FSA).

The opposition’s Syrian interim government took a step in that direction Dec. 9 by holding a symposium on the subject. The symposium, held at the headquarters of International Sham University in Azaz, was attended by Abdel Hakeem al-Masri, the interim government's economy and finance minister, and by Maarouf al-Khalaf, the dean of economics and management.

This comes after the Syrian pound plunged on the black market against the dollar and other foreign currencies, leading to a major economic crisis and a significant increase in food prices in Syria. The black market exchange rate of the Syrian pound hit a low Dec. 1 of 950 pounds to the dollar. On Dec. 8, interim government President Abdurrahman Mustafa announced efforts to replace the pound

Mustafa said his government will be injecting Turkish currency into northern Syria in denominations of 5, 10 and 20 liras to maintain citizens' purchasing power, protect their money and property and facilitate their daily transactions. 

On Dec. 2, the Azaz local council in the north of Aleppo province decided to use the Turkish lira in gold transactions due to the Syrian pound's collapse and because foreign exchange offices stopped trading in dollars there.

Naseem Zaki Abu Faruq, the local council's media director, told Al-Monitor, “The decision to use the Turkish lira instead of the Syrian pound in gold transactions came against the backdrop of the great collapse in the price of the Syrian pound against the dollar. It's normal for local economic entities to shift to another currency.”

Masri told Al-Monitor, “Replacing the Syrian pound is very necessary because its disintegration is affecting people’s savings and purchasing power in areas under FSA control." He added, “The Syrian regime flooded the market with Syrian banknotes, which led to the collapse of the exchange rate of the Syrian pound against other currencies and resulted in high prices and inflation."

Masri said, “The exchange rate of the Syrian pound may [reach] 2,000 against the dollar, and one of the most important reasons we should replace the Syrian pound with the Turkish lira is the instability and volatility of the Syrian currency, which lost 95% of its value. This has very bad repercussions for the poor. Economic sanctions on the Syrian regime will also erode the middle class. Most citizens are below the poverty line and there are only a few rich people left. The [interim government's] decision to switch currencies is part of its work program.”

He continued, “In FSA-held areas, many employees already get their salaries in currencies other than the Syrian currency, such as the dollar or Turkish lira, which will facilitate the process of replacing the Syrian pound. For example, [interim government] employees, university professors, teachers, doctors, police and FSA members all get paid in Turkish lira. When they convert their salaries to the Syrian pound, they are incurring huge losses."

Turkey is supporting civilian and FSA institutions to get them to resist any attempts by the Kurdish People's Protection Units (YPG) to control the area near Turkey's southern border.

“There are difficulties that may be faced along the way, however, as there is a lack of US dollars and Turkish liquidity in FSA areas," Masri added. "Also, there still are commercial exchanges with the Syrian regime, and there is neither a central bank nor a monetary policy nor any type of control over foreign exchange offices. But the Syrians in FSA-controlled areas are aware of the importance of this decision, and this will contribute to the success of the step."

Maher Sawah, a civilian relief activist from al-Bab in Aleppo province's northeast, expressed concern that the poor will suffer from a currency change. He told Al-Monitor, “I am against replacing the Syrian currency. We are running a great risk. The poor and the low-income people might face more disastrous conditions in the event the currency is replaced."

But Ibrahim al-Tadfi, an economic activist from Azaz, supports the change. “I think that replacing the Syrian pound with the Turkish lira has become a necessity and ... Turkey is the largest trading partner with the FSA in northern Syria. Also, using the Turkish lira will preserve and protect the money of the FSA areas." He told Al-Monitor that when the Syrian pound gets traded, this ultimately benefits the Syrian regime.

“I believe that Turkey is in favor of the step, as it already pays the salaries of employees in the FSA areas in Aleppo province in Turkish lira," he said.

Mahmoud Wahab, who works at a foreign exchange office in Azaz, told Al-Monitor, “I encourage the replacement of the Syrian currency in the FSA areas, as the Turkish currency is more stable, can protect people’s purchasing power and is capable of preventing an increase in food prices.”

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