The devastating domino effect of Turkey's currency crisis on northwest Syria

Turkey's currency, the Turkish lira (TRY), was adopted in June 2020 as an alternative to the Syrian pound (SYP) in northwest Syria, after the SYP's collapse and fears it would keep plummeting due to the myriad crises afflicting the region.

However, the TRY itself is now deteriorating continuously against the US dollar – which is having severe economic ramifications across the region.  

Experts believe the step was made hastily, with no attempt to predict its impact nor introduce mechanisms to facilitate imports and exports with the new currency. Similarly, no authority in northwest Syria was managing monetary policy – including the shift to the new currency.

Furthermore, when the change occurred, workers' wages weren't amended to align with the new currency – salaries have remained weak even as the price of goods has risen. Goods have also been repriced in TRY and USD without any monitoring.

"No authority in northwest Syria was managing monetary policy – including the shift to the new currency"

Price chaos in northwest Syria

In early 2021, the TRY entered a period of deep turbulence, plunging in value repeatedly between periods of partial recovery. Recently it slipped to a record low of TRY 20.7 to $1, from TRY 8.8 to $1 in 2021. The ramifications throughout this period have been clearly seen across northwest Syria.

Because most in the region rely on the TRY (apart from traders who increasingly price goods in dollars), these fluctuations impact people fast, exacerbating existing problems like low incomes, inflation, a lack of jobs, and a lack of access to basic essentials for many.

The TRY's collapse has affected prices of both local and imported goods and seen chaos hit food stores, with prices varying wildly between shops. This is because some sellers have kept their stock priced in TRY, changing it every time the value fluctuates, while others price in dollars, with customers informed of the cost in TRY according to the exchange rate at the moment of sale.

Teacher Salma Hajj Musa (34) saw her income dwindle as the TRY's value fell relentlessly, and began searching for a second job. She now sells second-hand clothes in the evenings after finishing her shift at a school close to her home in Salqin, Idlib province.

Salma's monthly teaching salary of around $100 is no longer enough to provide for her four children. Their father died from Coronavirus last year leaving her the sole breadwinner, and the currency devaluation makes things even harder, she says.

Price manipulation to exploit the poorest

She adds that, because prices are rising at the same time the dollar exchange rate is rising, unscrupulous merchants are taking advantage of the situation to make a profit, exploiting the lack of supervision as well as the lack of awareness of many in the region around exchange rates. Prices surged whenever the dollar exchange rate rose, she explained, but she never saw any drop in prices in periods of recovery.

"Salma's monthly teaching salary of around $100 is no longer enough to provide for her four children. Their father died from Coronavirus last year leaving her the sole breadwinner"

Salma calls on the de facto authorities to set a minimum wage and to start controlling prices, as well as working on job creation in the region and loan provision for emerging projects.

Heading towards famine

UN Under-Secretary-General for Humanitarian Affairs, Martin Griffiths, estimated that over 90 percent of Syrians across the entire country (regime and non-regime held) are living below the poverty line, and experts have warned the country could be heading towards famine as a result of several factors, including the ongoing and intensifying drought, water management policies in the region, the unprecedented deterioration in food security exacerbated by global food price hikes, and the drop in humanitarian assistance.

An estimated 6.7 million people live in the non-regime-held regions of northern Syria, in an area of around 20,300 sq km: around 11 percent of Syria's total landmass. 4.2 million live in Idlib province and the south Aleppo countryside under Hayat Tahrir al-Sham (HTS) control. Two million reside in the "Euphrates Shield" region comprising Jarablus, Azaz and Al-Bab, and 0.5 million in the "Olive Branch" areas of the Afrin district and its countryside. 1.5 million live in IDP camps.

Work doesn't pay

Alongside high and rising unemployment rates in northern Syria, most work opportunities there are too poorly paid to secure basic living needs.

An Assistance Coordination Unit (ACU) (a Syrian NGO based in Turkey) study released in 2021 indicated that 73 percent of those employed in the region earned less than $200 per month, with 28 percent earning less than $100 per month. Experts estimate that a family of 5 would need at least $200 (4000 TRY) per month to secure their fundamental needs excluding rent (according to a survey by the author in which trade and economics graduates were interviewed).

Khadija Al-Bakour is in her sixties and lives with her husband in the poverty-ridden and under-funded camp of Deir Hassan in northern Idlib. The amount sent by her son in Germany no longer covers her medicines: she suffers from high blood pressure, diabetes and a heart condition.  

"For years my son, who has been in Germany since the war started, has sent $200 per month which was enough to cover my monthly expenses, but the dollar shortage and the collapse of the Turkish lira are impacting every area of life," she says.

"Workers in northern Syria are struggling to make ends meet, as the gap constantly widens between the low income levels and the rising prices of basic commodities"

She explains that the prices for medicines today are out of control and keep rising so that many can no longer afford them.

Most workers in northern Syria are struggling to make ends meet, as the gap constantly widens between the low-income levels and the rising prices of basic commodities – from foodstuffs to fuel and transportation; as well as rent, electricity and internet prices.

Selling on credit

Trader Omar Sheikh Hamdan (46) complains that "civilians only buy only the essentials, which has damaged local markets, and hurt us merchants a lot, especially as we sell most of our goods on credit, which has led to a drop in imports. Then there are the taxes imposed on imported goods increasing as the Turkish lira drops, which is forcing us to amend our prices continuously and to price things in dollars."

Hamdan stressed the many issues which hindered investment in northern Syria – the deep instability and lack of security put potential investors off investing in mid to large-scale projects, as military conflict could break out at any moment in a region awash with weapons and repeatedly bombed, and areas could also change hands.

Recently, a concerning rise in day-to-day hunger has been observed by humanitarian organisations among the poorest in northwest Syria due to families' inability to secure sufficient food ("hunger" as a humanitarian term indicates periods of severe food insecurity where people may go for days without eating). Despite the dire conditions long suffered by the residents of northwest Syria, this is something new in the region.

On reasons for the dollar shortage in northwest Syria, Economic researcher Younes al-Karim, told The New Arab this is due to the lack of international aid for Syria in general and northwest Syria in particular, as most Syria-related aid has been directed to Syria's neighbouring countries where the majority of refugees reside, while northwest Syria has been neglected.

He added that it had also become complicated to transfer money into northwest Syria from Turkey due to the economic and political conditions in Turkey, further impacting the cash flow into the region. He added that the PTT (Turkey's postal service) offices, for example, through which money transfers could be made, were still few in northwest Syria.

Another factor centres on the fact that most UN aid into Syria goes via the regime, which undermines the amount of aid coming into northwest Syria.

Aid dependent

Al-Karim stresses that northwest Syria doesn't have an economy, but depends entirely on UN aid to secure the daily needs of the population. Therefore, the level of food security and impoverishment rises and falls in line with the volume of aid entering the region, he explains, especially because the region is closed off, and is more a collection of displacement camps than a normal inhabited region.

Commerce is mostly limited to smuggling operations between the areas of the de facto authorities: the regime, Syrian Democratic Forces (SDF), Hayat Tahrir al-Sham (HTS), and the Syrian Interim Government (SIG), he adds.

Abdul Hakim Al Masri, the SIG's economy minister, puts the devaluation of the TRY down to Turkey deliberately lowering the interest rate, as he aims to encourage investment in it. He believes the impact has been felt most deeply in northwest Syria, where high unemployment and a large labour pool have seen wages that were low, to begin with stagnate.  

Syrian humanitarian organisations and the projects they implement constitute almost a third of the economy in northern Syria. However, these have seen a clear decline, especially in the food security sector which has reduced by over 50 percent even as the organisations struggle to keep providing emergency support to the scores of displaced.

Inhabitants of rebel-held Idlib, in northern Syria, said they felt "betrayed" by the moves to rehabilitate Assad's government.https://t.co/qrJMuXnocu

— The New Arab (@The_NewArab) April 15, 2023

The Syrian Response Coordinators team issued a statement warning of signs of economic collapse in northwest Syria, which would be most devastating for those in IDP camps and could leave them unable to secure enough food.

They also estimated that in the densely populated northern regions, 65 percent of families had been forced to reduce the number of meals they had per day, and this was the case for 89 percent in the IDP camps.

Hadia Al Mansour is a freelance journalist from Syria who has written for Asharq Al-Awsat, Al-Monitor, SyriaUntold and Rising for Freedom Magazine.

Article translated from Arabic by Rose Chacko