Syria rations imports as sanctions take toll

Friday 17/04/2015
Not the market for luxury items

Syria is slashing imports of luxury items to preserve dwindling foreign reserves, a sign President Bashar As­sad is feeling the pressure of an international embargo meant to try to impede his ability to fight the civil war.

But economists said Syria’s four-year civil war had in any case re­duced imports of non-essential items.

“The Syrian crisis itself is enough to automatically downsize im­ports,” Jordanian National Micro­finance Bank General Manager Khaled Muhiesen told The Arab Weekly.

“The majority of Syrian im­ports are foodstuffs and perish­able goods and the importation of luxury goods is already small and limited.”

Importers require government licences that allow them to request a favourable exchange rate at the Central Bank, but the government has issued fewer licences and the Central Bank has increasingly de­clined to offer importers favour­able conversion rates. According to the Syrian Ministry of Economy and Foreign Trade, import licenc­es have decreased 30% since the measures went into effect in Febru­ary.

“A month ago, I got a text mes­sage from the ministry telling me that because of the shrinking for­eign currency reserves, I would no longer get the preferential dol­lar rate at the Central Bank,” one importer of consumer goods told Agence France-Presse (AFP). “I’ve been left to fend for myself.”

Two-thirds of Syrian import li­cences granted in the last quarter of 2014 went to industries consid­ered essential, including fuel, agri­culture and pharmaceuticals, said an official at the Syrian Ministry of Economy and Trade quoted by the Saudi Al Watan daily.

That quarter, the government re­ceived import requests worth $2.7 billion, but only granted licences worth $1.2 billion, and the Central Bank offered preferential exchange rates to just 13% of those granted licences, the official told Al-Watan.

Announcing the import curbs, Syria’s Central Bank said it was taking immediate steps to reduce non-essential imports and prop up exports to also save a sliding Syr­ian pound. Syria’s economy has been battered by conflict that be­gan with peaceful anti-government demonstrations in March 2011 and later descended into an all-out civil war. Activists estimate that more than 202,000 civilians and an addi­tional 80,000 government troops and rebels have been killed.

Assad’s regime has taken similar import curbs at least twice since the war broke out.

The smart sanc­tions imposed on Damascus have seen it losing its crude oil ex­ports to its main market in Europe and a freeze on Syrian assets in the United States. The 22-member Arab League im­posed its own pun­ishment on Assad. The Arab sanctions in­clude a freeze on Syrian assets, an arms embargo and a ban on Syrian VIP travel to Arab states. Flights by Arab airlines to Syria were also suspended.

The sanctions have had a dra­matic effect on the Syrian econ­omy, according to the private research group Syrian Center for Policy Research (SCPR).

It said Damascus lost nearly 40 years of economic development and accumulation of capital, bring­ing back the Arab nation’s wealth to the level it was at the end of the 1960s. Losses to the Syrian econo­my totalled $202.6 billion, equiva­lent to 383% of gross domestic product (GDP) in 2010, the year be­fore the conflict started, according to SCPR.

Syria’s exports in 2014 were worth just $1.8 billion, down from $11.3 billion in 2010, it said. The ratio of exports to imports deterio­rated from 82.7% in 2010 to 29.7% in 2014.

But how much can the Syrian government really help shrinking foreign currency reserves?

For Muhiesen, the Jordanian Na­tional Microfinance Bank general manager, reining in imports will have little effect on reducing the exchange rate. He suggested a sys­tem based on refraining from in­terfering in imports of basic goods and raw materials. “The import of non-essential or luxury goods should become linked to foreign currency brought in through ex­ports,” he added.

Syria may need to set and fix the exchange rate used in imports, he maintained.

Jordanian economist Khalid Wa­zani said the Syrian moves point to efforts to protect remaining foreign reserves.

He said he expected the Syrian regime to take measures to prevent a further decline of the Syrian cur­rency, especially since the relative value of the pound has dropped by more than 400% since 2011.

The halting of the importation of non-essential items will create a black market for commodities and items in Syria, which will nega­tively affect Syrians, Wazani cau­tioned.

“Prices of commodities will rise sharply as such conditions rep­resent a fertile ground for black markets,” Wazani told The Arab Weekly.

By 2013, the SCPR estimates manufacturing output had fallen to just 18.6% of its 2010 levels, but did not disclose other details. Last year, output rebounded somewhat but was still at just 21.7% of 2010 levels by the end of 2014.

“We asked the government to re­duce imports and encourage local industry and exports,” said Mazen Hammour, secretary-general of the Syrian Exporters Federation.

“If local industry is solid, then exports will increase and so will foreign reserves,” he told AFP.

“The country doesn’t need to be importing luxury products like pineapples and French cheeses,” Hammour added. “We should be importing primary materials nec­essary for local industry to produce merchandise that is export qual­ity.”