A financial crisis in Lebanon has hit the economy of neighbouring Syria hard, choking off a vital source of dollars and dragging the Syrian pound to record lows, Reuters reports.
Shut out of the global financial system by Western sanctions, Syria’s economy has depended on banking ties to Lebanon to keep business and commerce running during the country’s more than eight-year-old war.
But as Lebanese banks impose tight controls on hard currency withdrawals and transfers abroad, wealthy Syrians have found their funds inaccessible. The flow of dollars to Syria from Lebanon has all but stopped, according to three businessmen and five bankers in Damascus and abroad.
“These deposits are now trapped. You can imagine the aftershocks from this which is beginning to surface in the Syrian economy,” said a senior Lebanese banker who handles accounts of wealthy Syrians, speaking on condition of anonymity due to the sensitivity of the matter.
Lebanon’s long-brewing economic crisis is the worst since its 1975-90 civil war. The banks are seeking to prevent capital flight as dollars have become scarce and the value of the Lebanese pound has slumped on a black market.
The Syrian pound has nosedived by 30% in the weeks since Lebanon’s economic crisis escalated on Oct. 17 after a wave of anti-government protests swept the country to Syria’s west.
The Syrian pound hit an all-time low of around 765 to the dollar this week, compared to 47 before the uprising against President Bashar al-Assad began in 2011 and escalated into full-blown war with rebels and militants.
Wealthy Syrians are believed to have deposits of billions of dollars in Lebanese banks, businessmen and bankers said. Interest paid on Syrians’ deposits in Lebanon and remitted home has been an important source of dollars for the economy.
Unable to transfer dollars directly to Syria, Syrians outside the Middle East have used Lebanon’s financial system as a conduit to send funds to their relatives estimated at hundreds of millions per year. This flow has also been hit.
Syrian labourers in Lebanon are also feeling the effects of a sharp contraction in an economy that is shedding jobs fast.
“The Syrians may be even more affected by the restrictions than others,” said Kamal Hamdan, who heads the Beirut-based Consultation and Research Institute think tank.