From the Sequestration of the Syrian Pound to its Release; towards further Public Impoverishment
All the financial and monetary procedures that have been officially taken and implemented, especially during the previous two years, boil down to the aim of sequestrating the Syrian pound and preventing the speculation of it, in addition to limiting the circulation of its cash flow as much as possible. Regardless of the accuracy and validity of these Resolutions, one of their consequences was the inflation of money supply in public and private banks, reaching a large excess liquidity that is not practically invested. These mechanisms of releasing this excess bank liquidity have started through a series of financial and monetary Resolutions, and these Resolutions have given way to (public and private) banks to widely open the door for lending, by opening the loan ceiling for some, and raising it for others.
So, have the financial and monetary procedures achieved their announced objective and aim to reach a state of financial and monetary stability, especially on the level of maintaining the purchasing power of the Syrian pound, to take the Resolutions of releasing the excess monetary liquidity prepared for lending in this way?
The Resolutions of the Central Bank
Resolution No. 433 of Dec 30, 2021 has been issued by the Monetary and Credit Council, which includes allowing operating banks to grant credit facilities in the form of (loans/ financing) to finance industrial projects in accordance with the list attached with the mentioned Resolution. In addition to funding the projects of renewable energy production, without adhering to specific loan ceilings in accordance with Circular No. 4774/16 of 2020, issued according to the recommendation of Economic Commission No. 35 of 2020. Kassioun has previously published an article specified for this Resolution when it was issued, entitled: “The Altruistic Generosity of the Central Bank is for the Benefit of who?”
Resolution No. 434 of Dec 30, 2021 has also been issued. It included the exclusion of the Industrial Bank from the provisions of article 6 of Resolution No. 433, regarding the maximum limits of the number of facilities granted from the credit facilities portfolio made by the bank, with what goes in line with the nature of the mentioned bank that is mainly directed to the industrial sector. This is, furthermore, considering that its credit portfolio is mainly based on financing and supporting this type of projects, according to its terms, policies, and procedures.
According to a statement issued by the Central Bank on Jan 01, 2022, that has been published on its official webpage, “It is now allowed for banks to finance industrial projects, including renewable energy projects, starting from the date of the notification of Resolution No. 433. That is in accordance with controls, terms, and conditions set out within it and followed by banks, in order to achieve the desired objectives of supporting industrial projects in the current and future phase, and the reflection of their performance on national economy”.
Resolutions of Public Banks
The Savings Bank announced on Jan 31, 2022, a bunch of new Resolutions under which loan ceiling was raised, the number of guarantees was reduced, the method of calculating interest was modified, and the process of opening bank accounts was facilitated. The most prominent of the Resolutions was: raising the ceiling of loans granted to low-income civilians and military personnel to 5 million SP instead of 2 million SP. Also, the loan ceiling of retiree was modified to become 2.5 million SP after it used to be one million SP.
The Commercial Bank of Syria issued on the same date Jan 31, 2022, the executive instructions of the loan it grants to buy a residential or commercial property “finished or unfinished” with a maximum limit of 100 million SP. The instructions included a set of requirements, with a specification of interest rates on the loan, and other controls.
The Commercial Bank of Syria also issued on Feb 2, 2022, a Resolution to raise the ceiling of personal loan to 25 million SP, with a real estate guarantee, instead of 20 million SP, and to 10 million SP, with employee sponsors salary guarantees, instead of 5 million SP. As for the real estate bank, the director of the bank was quoted on Feb 3, 2022, that “the bank is currently studying the situation of withdrawals and the lending activity to decide whether or not to raise loan ceilings."
In an earlier statement for a former director of the bank on January 20, 2022, he said: “the banks deposits have exceeded 669 billion SP during the previous year, while the proportion of renovation loans from loans granted by the bank on 2022, which reached a number of 3808 with a total of 22,9 billion SP, has reached 44%”. He added: “the restoration of the capital of the real estate bank up to 16 billion SP after accumulated loss over the previous years has allowed the bank to raise the value of loaning for the single client up to 3 billion SP, as the capacity of the bank to loan the single client before did not exceed 600 million SP”.
Towards Further Impoverishment
It is certain that the above-mentioned Resolutions will lead to injecting more cash flow into local markets, which is represented in excess liquidity available in banks and available for lending, and that is undoubtedly a huge money supply. However, what are the expected implications of starting to lend according to the contents of these Resolutions? According to specialists, in short, injection of currency in markets is done supposedly in accordance with the situation of production mainly, which is one of the roles of fiscal and monetary policies.
As when there is imbalance and disproportionality, the rates of inflation increase, and the purchasing power of currency decreases, i.e., citizens will be affected as a result, especially with everything related to future transactions. So, any instability in the value of the currency will affect the prices of goods in general, the values of future sales, loan repayments, and determining the values and prices of services.
Reality shows in advance that the sector of production (industrial, agricultural, and artisanal), which is mainly reliable to create the required proportionality between the actual amount of production and money supply that should be provided for exchange, is in its worst state, and there is no real intention to solve its crisis. Hence, the injection of more money supply in this deteriorating situation in production sectors will only result in further inflation, further decline in the purchasing power of the Syrian pound, and further impoverishment of citizens.
The Major Beneficiaries
It should be noted that all of this, of course, pours in the form of further profits in the pockets of major controllers of this cash flow in the market, especially speculators of foreign exchange, and those active in illegal trades, which include crossing borders. It is not conditional for those to be among borrowers, of course, but they themselves are major wealth and corruption moghuls in the country, which policies work to their advantage.
On the other hand, borrowers, especially the major ones, will benefit from the decline in the purchasing power of the Syrian pound when they pay back these loans, if they will pay them back, anyhow. This is whether paying back was in the form of monthly instalments or payments that are due at a certain time margins, in which case the loser will also be the lenders (public or private banks).
Nevertheless, in light of the above-mentioned Resolutions, and as a result of the hopeless number of policies followed and applied on production, real producers, and consumer, we seem to be on the verge of facing a new decline in the purchasing power of the Syrian pound, and will move towards further inflation, i.e., further deterioration in the situation of living and services, and further general impoverishment.
The interests of money and corruption moghuls are more important and primary according to government policies than all other interests, including national interest.