In five years of war, the people of Syria have suffered enormously. At least 300,000 Syrians are thought to have been killed, with another 2 million wounded—that’s one in ten Syrians. More than 6 million Syrians are internal refugees, and 5 million have been forced into exile.
Even in the relatively stable government-controlled areas that are home for most Syrians, living standards have plummeted. According to a UN report, an incredible 83 percent lived below the poverty line in 2015, compared to less than a third before the war. Fully half of the population is now considered to live in extreme poverty. Unemployment was at 55 percent in 2015, with four out of five youths lacking a job. Many goods are hard to come by, and the government is in slow retreat from the limited welfare services and subsidies it used to offer. In five years, GDP has shrunk 55 percent.
Since this March, the value of Syria’s currency, the pound, has been sliding fast. Some economists now warn of a serious currency crisis. The dwindling value of the pound is cutting into Syrians’ purchasing power while raising the cost of subsidies on things like oil, which is imported and must be paid for in hard currency.
Until now, President Bashar al-Assad’s government had been able to use its foreign reserves, but these seem to have been depleted. It has also relied on financial support from its allies, primarily Iran. While the government in Tehran has spent billions of dollars on keeping its Syrian ally afloat, Vladimir Putin’s Russia seems to have contributed much less, despite intervening militarily on Assad’s side in September 2015. Iranian-backed oil shipments from Iraq are still keeping fuel flowing in Syria, and the government remains able to pay salaries, even outside areas of army control; this has been key to Assad’s hopes of one day reclaiming lost territory. But this spring, the devaluation of the Syrian pound has shown the weak foundation of the state’s influence. Little by little, the Syrian state is losing the ability to provide the services and patronage that has undergirded Assad’s rule.
Already, the falling pound has meant that most civil servants, soldiers, and others working for Assad’s government are unable to live off their salaries. Second and third jobs, various forms of corruption, remittances from family members abroad, and a strong dose of Syrian creativity have enabled many to survive, barely. But for how long, and what happens when paychecks are simply too small and too few to move the full machinery of state?
The Unsound Pound
The Syrian pound, known in Arabic as lira, began 2011 at a government-fixed rate of 47 pounds to the dollar. Both its black market value and the official rate (with a significant lag) gradually declined under pressure from the economic slowdown, war, and Western sanctions. In March 2013, the exchange rate briefly fell below 300 pounds per dollar, but it bounced back after an influx of hard currency—probably including significant financial aid from Iran—and ended the year around 150 to the dollar. Structural problems began to accumulate from 2014 onward and, all over the country, prices began to rise. The government has had no choice but to repeatedly slash subsidies on basic necessities such as bread and fuel, directly affecting the living standards of ordinary Syrians. By early 2016, a dollar traded for 400 pounds.
As the conflict entered its fifth year, the problems of the pound took a sharp turn for the worse. In mid-March 2016, Putin unexpectedly announced he would withdraw part of the Russian expeditionary corps from Syria. Although the withdrawal was largely a political stunt, the announcement set off a panic among Syrian currency traders, and by March 24, the value of the pound tumbled to an all-time low, at 500 pounds per dollar. The government urged calm, but seemed unable to stem the decline. Syria’s currency reserves, which had been estimated at around $18 billion at the start of the war, were now reportedly down to $700 million. On May 7, the value of the pound dropped past 600 to a dollar. The Central Bank blamed a “fierce media campaign” by Syria’s enemies, but this did little to restore public confidence in the economy.
Three days later, on May 10, the Syrian government ordered exchange companies to buy dollars at a rate of 620 pounds per dollar, which was very close to the black-market rate. Similar interventions were made in the following days, though the bank’s official dollar exchange rate remained at 512 pounds. Central Bank Governor Adib Mayyaleh has portrayed this as a step in bringing the currency back under control and promises a “sharp and unprecedented drop” in the price of a dollar, but some see it as a desperate step that will lead to Syria abandoning the fixed exchange rate. The Beirut-based economist Simon Neaime has warned of a “currency crisis” and uncontrolled inflation: “It’s not going to stop at 620. You might wake up tomorrow and it’s 1,000. After tomorrow, 2,000 Syrian lira per dollar. There is no ceiling as to where it’s going to stop.”
At 1,000 pounds to the dollar, an average salary in Syria would be worth $20 to $30, while the living costs of a family are calculated at around $500 per month. The situation is looking very grim indeed and reports have begun to emerge that people near President Assad’s inner circle are moving money abroad. “The Damascus businessmen are now actually beginning to be afraid, for real,” a trader told the Financial Times.
Ordinary Syrians Suffer
Of course, not all prices follow the value of the dollar, but the effects are severe and very widely felt by ordinary Syrians. The crumbling currency has “toppled their dreams and desires and depleted their savings and purchasing power,” wrote the al-Watan daily, which is owned by the president’s cousin.
Indeed, in one week in late March, when the pound had tumbled past an exchange rate of 500, the price of sugar increased by 25 percent and the state-controlled price of bread was raised by upward of 40 percent. Recently, the authorities were forced to dismiss news of a price hike on gasoline as “mere rumors,” after chaotic lines had begun to form at Damascus gas stations, where drivers tried to hoard fuel. On May 11, al-Watan accused the government of reducing flour distribution by 30 percent, and claimed that there were bread lines outside the state-run bakeries.
The cartoonist Fares Garabet may have captured the mood in his April 4 drawing of the Syrian Sisyphus—a man struggling to lug a giant one-pound coin up an impossibly steep mountainside.
Undermining Both Assad and the State
Opposition members in the Aleppo region have long toyed with plans to drop their currency in favor of the Turkish lira. These ideas may have been politically motivated at first, but they’re increasingly just common sense—no one wants to be paid in Syrian pounds. Some of the anti-government armed groups in Syria, including the so-called Islamic State, either pay their fighters in dollars, Turkish lira, or equivalent amounts in local currency. Documents produced by Islamic State administrators in Aleppo in spring 2015, which have been collected by the researcher Aymenn al-Tamimi, appear to show that while payments are made in Syrian pounds, they are calculated from a dollar baseline. Soldiers on guard duty would make $50 while a commander earned $275, though payment has reportedly been reduced considerably since then, at least in some areas.
By contrast, nominal government salaries have remained fixed or even been raised, while their real value plummets. Some 2.7 million people draw a salary or a pension from the state. This makes the government by far the largest employer in Syria and a vastly dominant economic actor in the regions still under Assad’s control. State employees received a significant pay hike in June 2013 and another, smaller one, in September 2015, but these have long since been outstripped by inflation; in real terms, their income is now much less than it was five years ago.
Most troublingly for Assad, that includes the security sector. The basic monthly pay of a soldier in the Syrian Arab Army is reportedly 18,000 Syrian pounds, though this can be complemented by various bonuses and officers earn more. Five years ago, 18,000 pounds would have meant $383, but at today’s rates, it is closer to $28. Last summer, the government ordered a special salary bonus of 10,000 pounds monthly for frontline troops, to compensate for inflation and to boost morale. But by the time the bonus began to be paid out in June 2015, its value had shrunk to a modest $34 and it is now down to $16.
These problems are slowly digging into the fundament of Assad’s power. As noted by the Syrian researcher Kheder Khaddour, the hollowing-out of Syrian military salaries since 2011 has pushed the officer corps even deeper into corruption. In order to make ends meet, many commanders allow recruits to bribe their way out of the service, aggravating an already crippling manpower shortage. Many units seem to contain “ghost soldiers,” who are listed on the payroll only to generate income for those in charge. The role of non-state funding for pro-government paramilitary groups, from Iran or Assad-connected businessmen, has grown tremendously. Since local militias are often able to provide higher salaries, they are a double-edged sword. On the one hand, the proliferation of militias has strengthened Assad’s military might; on the other, it is empowering parochial interests and weakening the military as a national institution.
Syria’s crumbling economy will thus continue to undermine both Assad’s military might and his capacity to govern, just as surely as it undermines the Syrian state and any hope for post-war reconstruction. The question is how much more the pressure can rise before something, deep inside the state, snaps.
For a more thorough look at Syria’s wartime economy, see the two excellent papers published by David C. Butter at Chatham House, Syria’s Economy (2015) and Salvaging Syria’s Economy (2016), and the report of a team of researchers from ESCWA and the University of St. Andrews, under the leadership of Abdullah al-Dardari and Raymond Hinnebusch: Syria at War: Five Years On (2016).
Tags: syrian pound, syria, bashar al-assad, syrian war, syrian crisis
A Fistful of Dollars: The Dwindling Value of Syrian State Salaries
In five years of war, the people of Syria have suffered enormously. At least 300,000 Syrians are thought to have been killed, with another 2 million wounded—that’s one in ten Syrians. More than 6 million Syrians are internal refugees, and 5 million have been forced into exile.
Even in the relatively stable government-controlled areas that are home for most Syrians, living standards have plummeted. According to a UN report, an incredible 83 percent lived below the poverty line in 2015, compared to less than a third before the war. Fully half of the population is now considered to live in extreme poverty. Unemployment was at 55 percent in 2015, with four out of five youths lacking a job. Many goods are hard to come by, and the government is in slow retreat from the limited welfare services and subsidies it used to offer. In five years, GDP has shrunk 55 percent.
Since this March, the value of Syria’s currency, the pound, has been sliding fast. Some economists now warn of a serious currency crisis. The dwindling value of the pound is cutting into Syrians’ purchasing power while raising the cost of subsidies on things like oil, which is imported and must be paid for in hard currency.
Until now, President Bashar al-Assad’s government had been able to use its foreign reserves, but these seem to have been depleted. It has also relied on financial support from its allies, primarily Iran. While the government in Tehran has spent billions of dollars on keeping its Syrian ally afloat, Vladimir Putin’s Russia seems to have contributed much less, despite intervening militarily on Assad’s side in September 2015. Iranian-backed oil shipments from Iraq are still keeping fuel flowing in Syria, and the government remains able to pay salaries, even outside areas of army control; this has been key to Assad’s hopes of one day reclaiming lost territory. But this spring, the devaluation of the Syrian pound has shown the weak foundation of the state’s influence. Little by little, the Syrian state is losing the ability to provide the services and patronage that has undergirded Assad’s rule.
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Already, the falling pound has meant that most civil servants, soldiers, and others working for Assad’s government are unable to live off their salaries. Second and third jobs, various forms of corruption, remittances from family members abroad, and a strong dose of Syrian creativity have enabled many to survive, barely. But for how long, and what happens when paychecks are simply too small and too few to move the full machinery of state?
The Unsound Pound
The Syrian pound, known in Arabic as lira, began 2011 at a government-fixed rate of 47 pounds to the dollar. Both its black market value and the official rate (with a significant lag) gradually declined under pressure from the economic slowdown, war, and Western sanctions. In March 2013, the exchange rate briefly fell below 300 pounds per dollar, but it bounced back after an influx of hard currency—probably including significant financial aid from Iran—and ended the year around 150 to the dollar. Structural problems began to accumulate from 2014 onward and, all over the country, prices began to rise. The government has had no choice but to repeatedly slash subsidies on basic necessities such as bread and fuel, directly affecting the living standards of ordinary Syrians. By early 2016, a dollar traded for 400 pounds.
As the conflict entered its fifth year, the problems of the pound took a sharp turn for the worse. In mid-March 2016, Putin unexpectedly announced he would withdraw part of the Russian expeditionary corps from Syria. Although the withdrawal was largely a political stunt, the announcement set off a panic among Syrian currency traders, and by March 24, the value of the pound tumbled to an all-time low, at 500 pounds per dollar. The government urged calm, but seemed unable to stem the decline. Syria’s currency reserves, which had been estimated at around $18 billion at the start of the war, were now reportedly down to $700 million. On May 7, the value of the pound dropped past 600 to a dollar. The Central Bank blamed a “fierce media campaign” by Syria’s enemies, but this did little to restore public confidence in the economy.
Three days later, on May 10, the Syrian government ordered exchange companies to buy dollars at a rate of 620 pounds per dollar, which was very close to the black-market rate. Similar interventions were made in the following days, though the bank’s official dollar exchange rate remained at 512 pounds. Central Bank Governor Adib Mayyaleh has portrayed this as a step in bringing the currency back under control and promises a “sharp and unprecedented drop” in the price of a dollar, but some see it as a desperate step that will lead to Syria abandoning the fixed exchange rate. The Beirut-based economist Simon Neaime has warned of a “currency crisis” and uncontrolled inflation: “It’s not going to stop at 620. You might wake up tomorrow and it’s 1,000. After tomorrow, 2,000 Syrian lira per dollar. There is no ceiling as to where it’s going to stop.”
At 1,000 pounds to the dollar, an average salary in Syria would be worth $20 to $30, while the living costs of a family are calculated at around $500 per month. The situation is looking very grim indeed and reports have begun to emerge that people near President Assad’s inner circle are moving money abroad. “The Damascus businessmen are now actually beginning to be afraid, for real,” a trader told the Financial Times.
Ordinary Syrians Suffer
Of course, not all prices follow the value of the dollar, but the effects are severe and very widely felt by ordinary Syrians. The crumbling currency has “toppled their dreams and desires and depleted their savings and purchasing power,” wrote the al-Watan daily, which is owned by the president’s cousin.
Indeed, in one week in late March, when the pound had tumbled past an exchange rate of 500, the price of sugar increased by 25 percent and the state-controlled price of bread was raised by upward of 40 percent. Recently, the authorities were forced to dismiss news of a price hike on gasoline as “mere rumors,” after chaotic lines had begun to form at Damascus gas stations, where drivers tried to hoard fuel. On May 11, al-Watan accused the government of reducing flour distribution by 30 percent, and claimed that there were bread lines outside the state-run bakeries.
The cartoonist Fares Garabet may have captured the mood in his April 4 drawing of the Syrian Sisyphus—a man struggling to lug a giant one-pound coin up an impossibly steep mountainside.
Undermining Both Assad and the State
Opposition members in the Aleppo region have long toyed with plans to drop their currency in favor of the Turkish lira. These ideas may have been politically motivated at first, but they’re increasingly just common sense—no one wants to be paid in Syrian pounds. Some of the anti-government armed groups in Syria, including the so-called Islamic State, either pay their fighters in dollars, Turkish lira, or equivalent amounts in local currency. Documents produced by Islamic State administrators in Aleppo in spring 2015, which have been collected by the researcher Aymenn al-Tamimi, appear to show that while payments are made in Syrian pounds, they are calculated from a dollar baseline. Soldiers on guard duty would make $50 while a commander earned $275, though payment has reportedly been reduced considerably since then, at least in some areas.
By contrast, nominal government salaries have remained fixed or even been raised, while their real value plummets. Some 2.7 million people draw a salary or a pension from the state. This makes the government by far the largest employer in Syria and a vastly dominant economic actor in the regions still under Assad’s control. State employees received a significant pay hike in June 2013 and another, smaller one, in September 2015, but these have long since been outstripped by inflation; in real terms, their income is now much less than it was five years ago.
Most troublingly for Assad, that includes the security sector. The basic monthly pay of a soldier in the Syrian Arab Army is reportedly 18,000 Syrian pounds, though this can be complemented by various bonuses and officers earn more. Five years ago, 18,000 pounds would have meant $383, but at today’s rates, it is closer to $28. Last summer, the government ordered a special salary bonus of 10,000 pounds monthly for frontline troops, to compensate for inflation and to boost morale. But by the time the bonus began to be paid out in June 2015, its value had shrunk to a modest $34 and it is now down to $16.
These problems are slowly digging into the fundament of Assad’s power. As noted by the Syrian researcher Kheder Khaddour, the hollowing-out of Syrian military salaries since 2011 has pushed the officer corps even deeper into corruption. In order to make ends meet, many commanders allow recruits to bribe their way out of the service, aggravating an already crippling manpower shortage. Many units seem to contain “ghost soldiers,” who are listed on the payroll only to generate income for those in charge. The role of non-state funding for pro-government paramilitary groups, from Iran or Assad-connected businessmen, has grown tremendously. Since local militias are often able to provide higher salaries, they are a double-edged sword. On the one hand, the proliferation of militias has strengthened Assad’s military might; on the other, it is empowering parochial interests and weakening the military as a national institution.
Syria’s crumbling economy will thus continue to undermine both Assad’s military might and his capacity to govern, just as surely as it undermines the Syrian state and any hope for post-war reconstruction. The question is how much more the pressure can rise before something, deep inside the state, snaps.
For a more thorough look at Syria’s wartime economy, see the two excellent papers published by David C. Butter at Chatham House, Syria’s Economy (2015) and Salvaging Syria’s Economy (2016), and the report of a team of researchers from ESCWA and the University of St. Andrews, under the leadership of Abdullah al-Dardari and Raymond Hinnebusch: Syria at War: Five Years On (2016).
Tags: syrian pound, syria, bashar al-assad, syrian war, syrian crisis