Syria’s Currency Reform Progress
Syria’s central bank has updated over a third of its physical cash supply with newly printed banknotes, as noted by Governor Abdulkader Husri in a recent exclusive interview. This change represents a significant step toward regaining financial oversight after years marred by conflict and a sharp devaluation of the currency.
In January, the central bank rolled out new banknotes, removing two zeros along with images of the long-standing leader, Bashar al-Assad, and his family. This move aims to stabilize the economy and restore trust in the national currency, which has plummeted in value by more than 99% since the civil war began in 2011.
According to Husri, around 35% of the 41 trillion Syrian pounds previously in circulation have been replaced due to this currency reform. He expressed optimism regarding the “visible progress” made in reestablishing control over the money supply. He mentioned that the overarching goals extend beyond mere stabilization, seeking also to reduce reliance on foreign currencies and bolster confidence in the Syrian pound.
Denomination, as this process is termed, is often employed by central banks facing high inflation to rebuild trust in their currencies. However, it doesn’t inherently alter the currency’s value. Before the reform, the Syrian pound’s exchange rate had sunk to roughly 10,000 pounds per dollar, a drastic drop from around 50 pounds before the civil upheaval.
This rapid decline has made daily transactions challenging for Syrians, who often carry large sums in bags just to cover everyday expenses. While Husri did not elaborate on the printing sources amid speculation around a Russian state-controlled supplier facing sanctions, he assured that the printing would be handled by three internationally certified facilities.
Gap Assessment Initiative
To enhance ties with foreign financial entities and improve the integrity of Syria’s financial system, the central bank enlisted US consulting firm Oliver Wyman to conduct a review known as the Gap Assessment. This process aims to align local banking practices with international standards and identify necessary reforms.
As investigations are set to commence soon, Syrian banks are gradually reestablishing connections to the global financial network after years of isolation from dollar transactions. Even with Western sanctions lifted post-Assad’s regime, lingering compliance issues among foreign banks continue to obstruct Syria’s full reintegration.
Husri mentioned that addressing compliance, governance, and transparency issues identified in the assessment report is a priority. Revitalizing Syria’s beleaguered banking sector is deemed essential to managing massive inflows of funds projected for the country.
The central bank is also pursuing the reopening of accounts with the New York Federal Reserve, a crucial step in regaining access to dollar transactions. Husri noted that this remains a key objective, stating, “We are still in the process, but we are making very good progress.”
Integration Agreement
Husri expressed approval of a recent integration agreement between the government in Damascus and the Kurdish-led Syrian Democratic Forces (SDF), which once held significant territory. Under pressure from military advances, the SDF agreed in January to cooperate with the central government.
In a rapid military campaign last month, Damascus regained control over vital oil and gas fields that were formerly under SDF jurisdiction, which previously generated revenue for the semi-autonomous northeastern region. Husri speculated that revenue from these resources could benefit Syria as a whole and potentially lead to double-digit GDP growth—far surpassing international forecasts, which predict just a 1% growth for 2025.
The governor indicated that funds would be managed through structured state accounts under significant oversight from the central bank. Although discussions regarding final allocations are still ongoing, he mentioned that these revenues are expected to support energy, public services, and economic recovery initiatives.
Additionally, the agreement allows for the central bank to expand its financial authority throughout Syria. Plans are in place to open a branch in Raqqa, previously under SDF control, with another branch anticipated in Hasakah. Husri emphasized the importance of these developments, noting they signify a restoration of monetary authority in a strategically crucial area.
Challenges from Lebanon’s Banking Crisis
One substantial hurdle for Syria’s financial revival is managing losses tied to the collapse of the Lebanese banking sector, where Syrian investors have over $1.6 billion exposed. The central bank had previously urged financial institutions to account for these losses by March.
While all banks are complying, they are at various stages of enacting their restructuring plans, according to Husri. Some banks face higher risks and need sustainable strategies to manage their exposure while remaining solvent. He emphasized that this year would be pivotal for the banking sector, aiming to complete the restructuring process and facilitate the licensing of new banks.
Banks that fail to comply with restructuring guidelines could face stringent measures including penalties, management changes, and oversight interventions. Husri reiterated the commitment to collaborate with banks to maintain solvency and liquidity, stressing that transparency and systemic stability are fundamental to restoring confidence in the financial framework.
