* Bankers estimate at least $600 mln bought since summer
* Some dollars sent to rebel areas end up in central bank
* Crumbling trade reduces dollar demand for imports
* Bankers expect authorities to keep pound stable
* Currency calm eases pressure on Damascus before talks
By Suleiman Al-Khalidi
AMMAN, Jan 15 Syria's central bank has bought
hundreds of millions of dollars from the domestic currency
market it now tightly controls, helping to build up depleted
reserves for an economy crippled by civil war, bankers and
After jailing dozens of dealers in a black market crackdown,
Damascus has pulled off the purchases without provoking a new
collapse of the Syrian pound - thanks partly to dollars pumped
into rebel areas by President Bashar al-Asssad's enemies.
Relative stability of the local currency has helped the
authorities to prevent a further jump in inflation which could
undermine support in areas it controls, and eased economic
pressure on the government before it attends talks in
Switzerland next week on a political solution to the war.
"In the last three months, the central bank has bought more
dollars than it is selling," said a banker in a local private
bank familiar with central bank thinking, who estimates between
$5 million and $10 million are bought daily.
The central bank has amassed at least $600 million by
selling local currency since the summer, two well-informed
bankers said, and yet this has weakened the pound only slightly
to 159 to the dollar from the 140.
Last summer the pound fell as low as 335 when the West
threatened air strikes before backing off, compared with 47
before protests against Assad erupted in March 2011.
Bankers say the central bank has also become adept at making
profits from its interventions, driving home the message to
other players that it is the market leader.
"It's the state that...creates the supply and controls
prices too," a banker at a private Damascus lender said. The
message from the central bank was: "'Don't play with this issue'
... They are proving effective," he added.
Nearly three years of conflict has caused billions of
dollars' worth of damage, disrupted agriculture, devastated
industry and wiped out foreign currency income from tourism and
Economists estimated Syria's foreign reserves at $16-$18
billion before the crisis. The central bank has not published
any recent figures, but its report for 2011 showed reserves had
crashed by about a third by the end of that year.
In an irony of a war which has no single front line, bankers
say the pound has been supported by $100 million to $200 million
flowing into rebel areas in northern Syria. Some of this money,
largely private and state funding for the rebels from the Gulf,
finds its way through local trade into central bank vaults.
"The dollars which are changed to the pound are going back
into the veins of the economy. They get into the economic cycle
and in the last resort go to the central bank " said one
Damascus-based Syrian banker who works in a foreign subsidiary.
People in rebel areas have returned to using the local
currency despite initial expectations of its collapse and this
has raised demand for the pound, bankers said.
"There was a danger that people would start using the dollar
and forget about the pound, but now people have lost confidence
the pound is going to collapse," one said.
Local firms closely associated with the authorities are now
doing most of the licensed currency deals after the dozens of
dealers blamed for wild speculation were jailed, giving Damascus
even greater muscle, dealers say.
"Control over demand and supply has become complete," said
one currency dealer who was briefly detained during the
crackdown on traders suspected of hoarding dollars and who now
operates covertly in the Abu Rumanah district of Damascus.
"There has been much more control and more oversight ...
They reduced black market activity to a trickle," said another
LOWER DEMAND FOR DOLLARS
Lower financing needs for imports as Syria's international
trade crumbles has also reduced demand for dollars.
Bankers and businessmen say authorities long ago ended an
import financing scheme that once gave Syrian importers access
to cheap dollars for buying industrial goods.
The authorities now offer a preferential dollar rate to only
a handful of businessmen importing basic foodstuffs, and much of
the commercial food imports that come to Syria are privately
financed, businessmen say.
The unlocking of some frozen state funds in European banks
accounts to allow for humanitarian food purchases will also
reduce future dollar needs even further.
Currency stability has effectively become Syria's economic
confidence index and an sign of the government's ability to
mitigate the effects of war and Western financial sanctions,
"It facilitates trade and industrial activity. When the
dollar is heading lower traders stop selling," said one
businessman. "A stable exchange rate promotes economic activity.
Such stability has helped to rein in pressures that led to
50 percent price increases for basic consumer items last year. A
main part of the authorities' economic policy to stave off wider
discontent in areas it controls has been to try to cap prices of
As the government prepares to send a delegation to the Swiss
talks next week, it faces little pressure to grant concessions
to divided rebel forces and a weak political opposition.
Bankers say the central bank's success in stabilising the
pound does not appear to be under threat for the near future.
Most predict a long and protracted war, saying most factors that
once weighed on the currency are now already factored in.