AMMAN (Reuters) – The Syrian pound fell to a record low on the black market on Wednesday, affected by the ripple effect of currency sentiment in neighboring Lebanon as it has extensive business and banking ties, say retailers and bankers.
Traders said it cost close to $ 4,000 to buy a dollar on the street on Wednesday after worried retailers saw the Lebanese pound collapse to a new low of $ 10,000 on Tuesday.
Two leading Damascus-based licensed currency traders said the fall of the Lebanese currency dealt a psychological blow to retailers trading their Syrian counterpart, which had already seen a rapid decline in recent weeks.
It has fallen by about 40% this year alone.
“Businessmen and traders are worried about the fear of a free fall in the next few days and are watching if the unrest grows in Lebanon and its impact on business because Lebanon is our lifeline to the outside world,” said a trader who demanded anonymity.
Syrian investors and businessmen hold billions of dollars in deposits in Lebanon’s crisis-stricken banks, for years a safe haven for investors fleeing sanctions and tight government control.
The Lebanese crisis has suffocated a major dollar source for Syria and further damaged a currency suffering from years of Western sanctions and a devastating ten-year conflict.
The last tumble of the Syrian pound happened last summer when it hit a psychological barrier of 3,000 against the dollar for fear that tougher US sanctions would worsen the economy.
The fall of the pound has affected business activity, with many traders and trading companies reluctant to sell or buy in a country where many turn to dollar savings to preserve wealth.
One banker said the addition to the pressure was government hard currency withdrawals from already depleted reserves to pay for large millions of dollars worth of raw materials and fuel.
The authorities’ unwillingness to intervene to protect their foreign exchange reserves weighed on the pound, he added. Further pressure comes from a sharp decline in transfers, which is a major source of foreign exchange from the tens of thousands of Syrians living in COVID-19 countries, he added.
The collapse of the pound has pushed up inflation and exacerbated difficulties as Syrians struggle to afford food, power and other bases. The pound had traded at $ 47 against the dollar before protests against President Bashar al-Assad broke out in March 2011.
Reporting by Suleiman Al-Khalidi, editing by William Maclean