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Inflation, shortages worsen Syrian poverty on eve of new US sanctions

The price of a typical basket of food items increased 111 percent in a year.

Prices of food, medicine, and other basics are spiralling out of reach in Syrian markets as the local currency collapses in value, shortly before new US sanctions against the government of President Bashar al-Assad come into force.

The value of the Syrian pound on the informal market has plunged from about 940 to the US dollar in January to a rate today of at least 3,000. And the rate of decline has been accelerating: it has more than halved in value since the beginning of May and dropped even faster in the last week.

Local media and Syrian diaspora reports say shops and pharmacies are keeping their doors shut because the value of the currency is dropping too fast for traders to set prices. Price rises of essentials including cooking gas, bread, and sugar – combined with increasingly worthless wages – are leading to public alarm and anger. At 2,000 Syrian pounds, a kilo of lemons is out of reach for a civil servant whose salary is now worth less than $20 a month. A social media posting shows someone rolling and smoking a cigarette made with a banknote.

As Syria enters its tenth year of civil war, more than 11 million people inside the country require humanitarian assistance, about half of whom are displaced from their original homes. Price rises are driving more people into poverty and food insecurity is rising, even in parts of the country relatively unaffected by the instability of recent years.

A rare street protest was reported in Sweida, an area in southwest Syria generally seen as loyal to the central government. Some Syrians in Jordan, mostly refugees themselves, are organising fundraisers to help people back home.

Before the latest crash, about a third of the population were not getting enough to eat, and 87 percent had no savings to fall back on, according to a WFP survey in April. At that time around half of surveyed households were buying food on credit. The price for a typical “reference” basket of food items such as flour, beans and oil representing a month’s supply had increased 111 percent in a year, according to WFP. The UN reported that COVID-19 border restrictions had further complicated the flow of imports, and the pandemic would exacerbate humanitarian needs.

Stiff penalties and a range of restrictions on unauthorised transactions, remittances, and foreign currency dealings imposed by the Central Bank have not led to any levelling off of the rate. Its official price stands at 704. 

Inflation and shortages have led to new levels of poverty in government-controlled areas, while some areas controlled by opposition armed groups in the north have reportedly adopted the Turkish lira or dollar as alternatives to the Syrian pound. 

The current economic crisis has multiple causes: the long civil war has drained any reserves Syria may have had; economic and political turmoil in Lebanon has seized up its dollar banking sector – used by Syrian importers and for the hard currency deposits of Syrian businesses; oil and gas production is barely functioning in Syrian government-held areas; the business empire of tycoon and al-Assad relative Rami Maklouf has been partially suspended in a public falling-out in the ruling family; and Russia and Iran have limited capacity to bankroll the recurrent costs of the Syrian state. 

Analysts dispute whether the US sanctions are the primary cause of the present crash. Sanctions have been unsuccessful in dislodging al-Assad from power before, but have already contributed to socio-economic impacts on the civilian population, despite being presented as highly targeted. The latest batch of sanctions is also designed to deter any foreign involvement in reconstruction of infrastructure damaged in the war, which includes civilian sites. 

The sanctions penalise most transactions with the Syrian state and aim to limit its military, construction projects, and the oil and gas industries. The measures, introduced in response to repression and human rights abuses, start on 17 June and affect governments and businesses worldwide including al-Assad allies Iran and Russia. 

The new US sanctions are dubbed the Caesar Civilian Protection Act, after the codename of a whistleblower on state torture. 

There are no UN sanctions on the Syrian government itself or its leadership. Most sanctions, including the new US sanctions, have exclusions for “humanitarian aid” – organisations, goods, and bank transfers for humanitarian purposes are exempt from the penalties.

However, sanctions by the United States and the EU have had a cumulative effect on humanitarian operations, and securing waivers to allow aid-related imports and bank transfers can be onerous: US banking and counter-terrorism sanctions have squeezed out most trade with Syria. Meanwhile, Syria’s main supplier of fuel – including cooking gas – is Iran, and tighter US sanctions on shipping have limited those imports too.

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